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ANNUAL REPORT - 2018ANNUAL REPORT - 2018

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Mangalore SEZ Limited

Board of Directors Shri Shashi Shanker : ChairmanShri Paritosh Kumar Gupta : Managing DirectorShri I.S.N Prasad : Independent DirectorShri Srinivas S Kamath : Independent DirectorShri A K Sahoo : Nominee Director of ONGCSmt. Cholpady Vathika Kamath : Additional Director (Co-opted on 14th November 2017)Shri Saibal Kumar De : Additional Director (Co-opted on 22nd December 2017)Shri M. Venkatesh : Additional Director (Co-opted on 25th June 2018)Shri Pankaj Kumar Pandey : Nominee Director (up to 19th August 2017)Shri Dinesh Kumar Sarraf : Chairman (up to 01st October 2017)Shri Jeevan Saldanha : Nominee Director of KCCI (up to 04th November 2017)Shri Pradeep Puri : Nominee Director of IL&FS (up to 23rd November 2017)

Shri H Kumar : Nominee Director of ONGC (up to 01st June 2018)

Company Secretary V. Phani Bhushan

Chief Financial OfficerGouranga Charan Swain

Statutory AuditorsM/s Maharaj N R Suresh and Co., Chartered Accountants, Chennai.

Internal AuditorsM/s Chokshi&Chokshi LLP, Chartered Accountants, Mumbai.

Secretarial AuditorM/s P.N. Pai & Co, Company Secretaries, Mangaluru.

Bankers

Registered Office3rd Floor, MUDA Building, Ashok Nagar, Urwa Stores, Mangaluru – 575 006, Dakshina Kannada Dist, Karnataka.Phone: 0824-2452748 / 2452750, Fax: 0824-2452749Website: www.mangaloresez.com; Email: [email protected]: U45209KA2006PLC038590.

Project Site Bajpe, Permude Village, Mangaluru – 574 509 Dakshina Kannada (Dist), Karnataka

CONTENTS

Sl.No. Particulars Page Nos.

1 12th Annual General Meeting Notice 2

2 Board’s Report 15

3 Secretarial Audit Report 31

4 Corporate Governance Report 35

5 Auditors’ Report on Standalone Financial Statements 60

6 Standalone Financial Statements 65

7 Auditors’ Report on Consolidated Financial Statements 121

8 Consolidated Financial Statements 126

9 Attendance Slip 181

10 Proxy Form 183

CORPORATE INFORMATION

Security Trustee SBICAP Trustee Company Ltd202, Maker Tower E, Cuffe Parade, Mumbai – 400 005

Corporation Bank MG Road Branch, Mangalore City Corporation BuildingLalbagh, Mangalore - 575 006

State Bank of IndiaCorporate Account Group – II, Redfort Capital Parsvnath Towers, 4th & 5th Floor, Bhai Veer Singh Marg, Gole Market, New Delhi - 110 001

Mangalore SEZ Limited ANNUAL REPORT - 2018ANNUAL REPORT - 2018

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Notice is hereby given that the 12th Annual General Meeting of the Members of MANGALORE SEZ LIMITED (MSEZL) will be held on Friday, the 28th September, 2018 at 12:30 pm at The Ocean Pearl, Navabharath Circle, Kodialbail, Mangalore - 575 003 to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt

a. the Audited Standalone Financial Statements of the Company for the financial year ended March 31, 2018, the report of the Board of Directors and the report of the Auditors thereon; and

b. the Audited Consolidated Financial Statements of the Company for the financial year ended March 31, 2018 and the report of the Auditors thereon.

2. To appoint a Director in place of Shri A.K. Sahoo (DIN: 07355933) who retires by rotation and being eligible, offers himself for re-appointment.

3. To appoint the Statutory Auditors

To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT in accordance with the provisions of Sections 139, 141 and 142 of the Companies Act, 2013 and other applicable provisions, if any, read with rules framed there under (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) approval of the members be and is hereby accorded for the appointment of M/s Ray & Ray, Chartered Accountants, bearing Registration No.301072E, as the Statutory Auditors of the Company for a period of 5 years from the conclusion of 12th Annual General Meeting till the conclusion of 17th Annual General Meeting at such remuneration as may be decided by the Audit Committee / Board of Directors thereon”.

FURTHER RESOLVED THAT the Board of Directors (which term includes a duly constituted Audit Committee of the Board of Directors) be and is hereby authorized to do all such acts, deeds, matters and things as may be considered necessary, desirable and expedient for giving effect to this Resolution and / or otherwise considered by them to be in the best interest of the Company.”

SPECIAL BUSINESS:

4. To consider and if thought fit, to pass with or without modification (s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT pursuant to Section 152, 161 and other applicable provisions, if any, of the Companies Act, 2013 (Act) read with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (the Rules), including any statutory modification(s) or re-enactments thereof for the time being in force, and in accordance with the Articles of Association of the Company, Shri Shashi Shanker (DIN: 06447938), who was appointed as an Additional Director of the Company with effect from October 16, 2017, pursuant to Section 161 of the Act and the Articles of Association of the Company, and who holds office up to the date of this Annual General Meeting of the Company, who being eligible, offers himself for appointment and in respect of whom a notice in

NOTICE OF 12TH ANNUAL GENERAL MEETING


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writing under Section 160 of the Act has been received from a member proposing his candidature for the office of Director, be and is, hereby appointed as Director (Nominee of ONGC) of the Company, liable to retire by rotation.”


“RESOLVED THAT pursuant to Section 152, 161 and other applicable provisions, if any, of the Companies Act, 2013 (Act) read with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (the Rules), including any statutory modification(s) or re-enactments thereof for the time being in force, and in accordance with the Articles of Association of the Company, Smt. Cholpady Vathika Kamath (DIN: 05351602), who was appointed as an Additional Director of the Company with effect from November 14, 2017, pursuant to Section 161 of the Act and the Articles of Association of the Company, and who holds office up to the date of this Annual General Meeting of the Company, who being eligible, offers herself for appointment and in respect of whom a notice in writing under Section 160 of the Act has been received from a member proposing her candidature for the office of Director, be and is, hereby appointed as Director (Nominee of KCCI) of the Company, liable to retire by rotation.”


“RESOLVED THAT pursuant to Section 152, 161 and other applicable provisions, if any, of the Companies Act, 2013 (Act) read with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (the Rules), including any statutory modification(s) or re-enactments thereof for the time being in force, and in accordance with the Articles of Association of the Company, Shri Saibal Kumar De (DIN: 00498241), who was appointed as an Additional Director of the Company with effect from December 22, 2017, pursuant to Section 161 of the Act and the Articles of Association of the Company, and who holds office up to the date of this Annual General Meeting of the Company, who being eligible, offers himself for appointment and in respect of whom a notice in writing under Section 160 of the Act has been received from a member proposing his candidature for the office of Director, be and is, hereby appointed as Director (Nominee of IL&FS) of the Company, liable to retire by rotation.”


“RESOLVED THAT pursuant to Section 152, 161 and other applicable provisions, if any, of the Companies Act, 2013 (Act) read with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (the Rules), including any statutory modification(s) or re-enactments thereof for the time being in force, and in accordance with the Articles of Association of the Company, Shri Venkatesh Madhava Rao (DIN 07025342), who was appointed as an Additional Director of the Company with effect from June 25, 2018, pursuant to Section 161 of the Act and the Articles of Association of the Company, and who holds office up to the date of this Annual General Meeting of the Company, who being eligible, offers himself for appointment and in respect of whom a notice in writing under Section 160 of the Act has been received from a member proposing his candidature for the office of Director, be and is, hereby appointed as Director (Nominee of ONGC) of the Company, liable to retire by rotation.”

8. To consider and if thought fit, to pass with or without modification (s), the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to Section 196, 197, 203 and other applicable provisions if any, of the Companies Act 2013 (“The Act”) read with Schedule V of the Act and the Companies (Appointment and Remunerations of Managerial Personnel) Rules, 2014 including any statutory modifications or enactments thereof from time to


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time, approval of the Shareholders be and is hereby accorded for the re-appointment of Shri Paritosh Kumar Gupta (DIN: 01054182), as Managing Director for a further period of 1 year with effect from May 19, 2018, at a remuneration of Rs. 30.00 Lakhs per annum.

“RESOLVED FURTHER THAT the Board be and is hereby authorized to alter the terms and conditions of the said appointment in such a manner as may be agreed by the Board and Shri Paritosh Kumar Gupta so as, not to exceed the limits specified in Section 196, 197 and Schedule V of the Companies Act, 2013, or any amendment thereto or enactments thereof with effect from such date as may be decided the Board.”

“RESOLVED FURTHER THAT, notwithstanding anything herein contained, where in any financial year during the currency of the tenure of re-appointment of Shri Paritosh Kumar Gupta as Managing Director, if the Company has no profits or its profits are inadequate, the company shall pay to Shri Paritosh Kumar Gupta, the above remuneration by way of salary and perquisites as minimum remuneration but not exceeding the limits specified under Clause A of Section II of Part II of Schedule V,Clause (d) of Section III of Part II of Schedule V to the Companies Act, 2013, or such other limits as may be prescribed by the Central Government from time to time as minimum remuneration."

“RESOLVED FURTHER THAT Shri V. Phani Bhushan, Company Secretary be and are hereby severally authorized to file e-forms with the Ministry of Corporate Affairs / Registrar of Companies, Karnataka and to do all such acts, deeds and things as may be deemed necessary to give effect to this resolution.”

By Order of the Board of Directors For Mangalore SEZ Limited

Place: New Delhi Phani Bhushan V.Date : 05th September, 2018 Company Secretary


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NOTES:

1. A Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of

himself and the proxy need not be a Member of the Company. Proxies in order to be effective must be received by

the Company at its registered office not later than forty-eight hours before the commencement of the meeting.

Proxies submitted on behalf of companies, societies, etc. must be supported by an appropriate resolution /

authority, as applicable. A person shall not act as a Proxy for one or more members and holding in the aggregate

not more than ten percent of the total voting share capital of the Company. However, a single person may act as

a proxy for a member holding more than ten percent of the total voting share capital of the Company provided

that such person shall not act as a proxy for any other person.

2. Every member entitled to vote at the Annual General Meeting of the Company can inspect the proxies lodged at

the Company at any time during the business hours of the Company during the period beginning twenty four

hours before the time fixed for the commencement of the Annual General Meeting and ending on the conclusion

of the meeting. However, a prior notice of not less than 3 (three) days in writing of the intention to inspect the

proxies lodged shall be required to be provided to the Company.

3. The relevant Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 in respect of items 4 to

8 of the Notice is annexed hereto.

4. The statement of the particulars of Directors seeking appointment / re-appointment as per the corporate

governance regulations is Annexed to the Notice and forms part of the Annual Report.

5. Relevant documents if any, referred to in the accompanying notice are open for inspection by the members at the

Registered Office of the Company on all working days, except Saturdays, between 11.00 a.m. and 1.00 p.m. up

to the date of the Meeting.

6. Members are requested to inform the Company, immediately of change in their particulars, including their

residential status.

7. Nomination facility: Pursuant to Section 72 of the Companies Act, 2013 (corresponding section 109A of the

Companies Act, 1956) individual / joint members are entitled to register nomination in respect of the shares held

by them in Form No.SH-13 and send it to the Company.

8. The Register of Directors and Key Managerial Personnel and their shareholding, maintained under Section 170 of

the Companies Act, 2013, will be available for inspection by the members at the AGM.

9. The Register of Contracts or Arrangements in which Directors are interested, maintained under Section 189 of the

Companies Act, 2013, will be available for inspection by the members at the AGM.

10. Route map for venue of 12th AGM is annexed.


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Item No.4:

Oil and Natural Gas Corporation Limited (ONGC), has vide their letter Ref. No. ONGC/CS/Sub&JV/2017, dated 10th October 2017 has nominated Shri Shashi Shanker, (DIN 06447938) Chairman & Managing Director of ONGC as Director and Chairman on the Board of MSEZL, consequent on superannuation of Shri D.K. Sarraf.

Pursuant to provisions of Section 161 of the Companies Act, 2013, read with Articles of Association of the Company, the Board of Directors have appointed Shri Shashi Shanker as an Additional Director (Nominee of ONGC) and as Chairman of the Company with effect from October 16, 2017.

Shri Shashi Shanker will hold office up to the date of this AGM. The Company has received notice in writing under the provisions of Section 160 of the Companies Act, 2013, from a member proposing the candidature of Shri Shashi Shanker for the office of Director.

Copy of the notice received under Section 160 of the Companies Act, 2013 is available for inspection by the members at the Registered Office of the Company during the business hours on all working days at the registered office of the Company up to the date of the meeting.

Shri Shashi Shanker is a Petroleum Engineer from Indian School of Mines (ISM), Dhanbad. He also holds an MBA degree with specialization in Finance. He has also received executive education from prestigious Indian Institute of Management, Lucknow and Indian School of Business, Hyderabad.

Shri Shashi Shanker is an industry veteran with over 30 years of experience in diverse E&P activities. Prior to his appointment as Director (T&FS) of ONGC in 2012, he has progressed through senior management roles in various work-centers including Institute of Drilling Technology, Dehradun; West Bengal Project; Assam Project and Deep-Water group at Mumbai. He was acclaimed for his performance in spearheading the deep / ultra-deep-water campaign of ONGC which was christened ‘Sagar Samriddhhi’.

Under his leadership, ONGC drilled the deepest deep-water well covering a water depth of 3174 metres, a world record. He also led the team to one of the finest Drilling performance in FY’17 when ONGC set a new record of drilling over 500 wells in 2016-17. This is the first time in 23 years that ONGC has crossed the 500-well mark.

Under his guidance, ONGC has led the delivery of cutting-edge IT solutions that drive growth, streamline performance and promote efficiency. He has provided much needed support for effective use of ERP and SCADA platform for real time information. During his tenure, ONGC has conceptualized an ambitious company wide project called “DISHA” for creation of a paperless office platform, the implementation of which is now underway. His vision and dynamic attributes have helped in making numerous operational and policy initiatives and steering the company through many milestones.

Currently Shri Shashi Shanker is the Chairman and Managing Director of ONGC. The appointment of Shri Shashi Shanker, as Director was made during the third quarter of FY 2017-18, hence he has attended 2 Board meetings during the year.

ANNEXURE TO THE NOTICE

EXPLANATORY STATEMENT PURSUANT TO THE PROVISIONS OF SECTION 102 OF

THE COMPANIES ACT, 2013.


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Shri Shashi Shanker is not related to any of the Directors of the Board. He doesn’t hold any equity shares of the Company. Accordingly, the Board of Directors of the Company recommends passing of the Ordinary Resolution set out in this item for your approval. None of the Directors, Key Managerial Personnel and their relatives except Shri Shashi Shanker is concerned or interested in this resolution. The Board recommends the resolution for your approval.

Item No.5

Kanara Chamber of Commerce and Industry (KCCI) vide its letter dated October 11, 2017 has nominated Smt. Cholpady Vathika Kamath (DIN: 05351602), President of KCCI as Director on the Board of the company.

Pursuant to provisions of Section 161 of the Companies Act, 2013, read with Articles of Association of the Company, the Board of Directors have appointed Smt. Cholpady Vathika Kamath as an Additional Director (Nominee of KCCI) of the Company with effect from November 14, 2017.

Smt. Cholpady Vathika Kamath will hold office up to the date of this AGM. The Company has received notice in writing under the provisions of Section 160 of the Companies Act, 2013, from a member proposing the candidature of Smt. Cholpady Vathika Kamath for the office of Director.

Copy of the notice received under Section 160 of the Companies Act, 2013 is available for inspection by the members at the Registered Office of the Company during the business hours on all working days at the registered office of the Company up to the date of the meeting.

Smt. Cholpady Vathika Kamath holds a Master’s Degree in Business Administration (MBA) from Manipal University. She has secured first rank and gold medal in MBA with finance as specialisation in the year 2011 from Manipal University. She has also secured the best outgoing student award from Manipal University. Smt. Vathika has secured first rank and gold medal in B.Com under Mangalore University in the year 2008-09. Smt. Vathika is the proprietor of M/s Vathika International Travels, a travel agency which aims at customizing tour packages of all kinds both domestic and international. Smt. Vathika has been a member of Board of Directors of KCCI for the last 6 Years and is presently the President of KCCI.

The appointment of Smt. Cholpady Vathika Kamath, as Director was made during the third quarter of FY 2017-18, hence she has attended one Board meeting during the year.

Smt. Cholpady Vathika Kamath is not related to any of the Directors on the Board. She doesn’t hold any equity shares of the Company. Accordingly, the Board of Directors of the Company recommends passing of the Ordinary Resolution set out in this item for your approval. None of the Directors, Key Managerial Personnel and their relatives except Smt. Cholpady Vathika Kamath is concerned or interested in this resolution. The Board recommends the resolution for your approval.

Item No.6

Infrastructure Leasing and Financial Services Ltd (IL&FS) vide their letter dated November 09, 2017 has nominated Shri Saibal Kumar De (DIN 00498241) as Director on the Board of MSEZL.

Pursuant to provisions of Section 161 of the Companies Act, 2013, read with Articles of Association of the Company, the Board of Directors have appointed Shri Saibal Kumar De as an Additional Director (Nominee of IL&FS) of the Company with effect from December 22, 2017.


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Shri Saibal Kumar De will hold office up to the date of this AGM. The Company has received notice in writing under

the provisions of Section 160 of the Companies Act, 2013, from a member proposing the candidature of Shri Saibal

Kumar De for the office of Director.

Copy of the notice received under Section 160 of the Companies Act, 2013 is available for inspection by the members

at the Registered Office of the Company during the business hours on all working days at the registered office of the

Company up to the date of the meeting.

Shri Saibal Kumar De has done his B. Tech (Chemical) from IIT, Kharagpur and has also done short courses on Project

Management and Infrastructure Finance & Project Development from IIM.

Shri Saibal Kumar De has more than 30 years of work experience spread across sectors and he has been specifically

associated with the infrastructure sector for more than last 15 years. Shri Saibal Kumar De has been responsible for

the conceptualization, structuring, implementation and delivery of many PPP projects across multiple sectors while

working in partnership with the various State Governments. His extensive experience in infrastructure spans across

maritime projects, logistics, urban infrastructure, industrial parks, SEZs etc. He has been actively involved in various

forums for the policy making and sector related reforms. He has successfully steered IMICL's delivery of projects from

the development to operational stage. He is presently the Whole Time Director and Chief Executive officer at IL&FS

Maritime Infrastructure Company Ltd ( IMICL).

The appointment of Shri Saibal Kumar De, as Director was made during the third quarter of FY 2017-18, hence he

has attended 1 Board meeting during the year.

Shri Saibal Kumar De is not related to any of the Directors on the Board. He doesn’t hold any equity shares of the

Company. Accordingly, the Board of Directors of the Company recommends passing of the Ordinary Resolution set

out in this item for your approval. None of the Directors, Key Managerial Personnel and their relatives except Shri

Saibal Kumar De is concerned or interested in this resolution. The Board recommends the resolution for your approval.

Item No.7

ONGC vide its letter reference ONGC/CS-MSEZ/2018 dated June 14, 2018 has nominated Shri Venkatesh Madhava

Rao (DIN 07025342), Managing Director of MRPL as Director on the Board of Mangalore SEZ Limited.

Pursuant to provisions of Section 161 of the Companies Act, 2013, read with Articles of Association of the Company,

the Board of Directors have appointed Shri Venkatesh Madhava Rao as an Additional Director (Nominee of ONGC) of

the Company with effect from June 25, 2018.

Shri Venkatesh Madhava Rao will hold office up to the date of this AGM. The Company has received notice in writing

under the provisions of Section 160 of the Companies Act, 2013, from a member proposing the candidature of Shri

Venkatesh Madhava Rao for the office of Director.

Copy of the notice received under Section 160 of the Companies Act, 2013 is available for inspection by the members

at the Registered Office of the Company during the business hours on all working days at the registered office of the

Company up to the date of the meeting.


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Shri Venkatesh Madhava Rao is a Chemical Engineer having over three decades of experience in Oil & Gas Sector. He is associated with Mangalore Refinery and Petrochemicals Ltd (MRPL) since 1994 and has executed all major projects.

Currently Shri Venkatesh Madhava Rao is the Managing Director of Mangalore Refinery and Petrochemicals Limited. The appointment of Shri Venkatesh Madhava Rao, as Director was made during the FY 2018-19, hence attendance at the Board meetings is not applicable.

Shri Venkatesh Madhava Rao is not related to any of the Directors on the Board. He doesn’t hold any equity shares of the Company. Accordingly, the Board of Directors of the Company recommends passing of the Ordinary Resolution set out in this item for your approval. None of the Directors, Key Managerial Personnel and their relatives except Shri Venkatesh Madhava Rao is concerned or interested in this resolution. The Board recommends the resolution for your approval.

Item No.8

The Board of Directors at the 53rd meeting held on May 14, 2018 have re-appointed Shri Paritosh Kumar Gupta, as the Managing Director of the company for further period of 1 year with effect from 19th May, 2018 at a remuneration of Rs.30 lakhs p.a., subject to the approval of the shareholders in the General Meeting. The Remuneration would be reimbursed by the company on receipt of payment advice from IL&FS.

Statement of Particulars required to be furnished as part of Schedule V of the Companies Act, 2013:

S.No Particulars Details

I General Information

1 Nature of Industry Development, Operation and Maintenance of Multi Product Special Economic Zone.

2 Date or expected date of commencement of commercial production

01st April 2015

3 In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus

Not Applicable

4 Financial performance based on given indicators

Particulars FY 2017-18 (Rs. in Cr)

FY 2016-17 (Rs. in Cr)

FY 2015-16 (Rs. in Cr)

Turnover 177.37 134.72 118.42

Expenses 166.45 125.58 117.19

Profit Before Tax

10.92 9.14 1.23

Profit After Tax

3.66 (5.98) (12.02)

Net Com-prehensive Income.

3.67 (6.13) (12.04)

5 Foreign investments or collaborations, if any.

Nil


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II Information about the appointee

1 Background details Shri Paritosh Kumar Gupta, 56 years, holds a Masters Degree in Economics from Delhi School of Economics, and an MBA from IIM, Lucknow with specialization in finance and marketing. He is a business leader & strategist with over 31 years broad-based experience in leading & transforming businesses /organizations and in developing, marketing, managing & financing infrastructure projects with extensive exposure to business partnerships with Governments.

2 Past remuneration drawn in the Company Rs 56 Lakhs per annum from May 2015 – May 2016Rs 56 Lakhs per annum from May 2016 – May 2017Rs 30 Lakhs per annum from May 2017 – May 2018

3 Recognition or awards He is the recipient of the British Nehru Fellowship Award (1994) and Monbusho Fellowship Award (1996), Japan.

Participated in Leadership Management programme on "Achieving Outstanding Performance Programme" held by INSEAD in Fontainebleau Cedex, France in September 2008

4 Job profile and his suitability Out of the 31 years’ experience, during the last about 14 years, Mr Paritosh Gupta has been managing infrastructure project development and financing companies and running them profitably at leadership or CEO levels. He has also been working with high quality Board members of Government, Public Sector Undertakings, Financial Institutions, Institutional Investors etc. This interaction and management have given him a very rich experience in running and managing progressive companies.

Having studied in some of the finest institutions in India and abroad with proven management, leadership and institution building experience and adequate knowledge and experience in running infrastructure and financing companies profitably, Mr Paritosh Gupta is eminently suitable for the post.

5 Remuneration proposed Rs. 30 Lakhs per annum

6 Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be with respect to the country of his origin)

Considering size of the company and profile of Mr Paritosh Gupta in terms of educational qualification, experience and proven management, leadership and institution building experience, his comparative remuneration profile with respect to the industry appears to be at a very modest level.

7 Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.

Nil

III Other Information

1 Reasons of loss or inadequate profits - Anticipated power revenues could not be met because of demand side constraints.

- Delay in taking the possession of the land by 2 units resulted in non-recognition of revenues from land.


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2 Steps taken or proposed to be taken for improvement

- Increase in power sales due to more units starting their commercial operations and measures taken for reducing the power purchase cost.

- Marketing efforts for leasing the balance land.

- Revenues will increase on account of supply of water, CETP usage etc by the upcoming units due to start of their commercial operations.

3 Expected increase in productivity and profits in measurable terms

- During the FY 2018-19, the Company anticipates for improvement in the revenues and margins.

IV Disclosures are provided in the Corporate Governance Report.

The details of Board meeting attendance and other details of Shri Paritosh Kumar Gupta have been mentioned in

the Corporate Governance Report which is forming part of the Board’s Report. Shri Paritosh Gupta holds 500 equity

shares of Rs.10 each in Mangalore SEZ Limited.

In order to comply with provisions of Section 203 of the Companies Act, 2013 and in order to have continuity and

stability in the operations of the Company, the Board of Directors recommends the resolution for your approval.

Except Shri Paritosh Kumar Gupta, who may be deemed to be concerned or interested in his own appointment, none

of the other Directors, Key Managerial Personnel & their relatives are concerned or interested in the said resolution.

By Order of the Board of Directors For Mangalore SEZ Limited

Place: New Delhi Phani Bhushan V.Date : 05th September, 2018 Company Secretary


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eran

w

ith

over

30

year

s of

ex

peri

ence

in

dive

rse

E&P

acti

viti

es.

Prio

r to

hi

s ap

poin

tmen

t as

D

irec

tor

(T&

FS)

of

ON

GC

in

20

12,

he

has

prog

ress

ed

thro

ugh

seni

or

man

agem

ent

role

s in

va

riou

s w

ork-

cent

ers

incl

udin

g In

stit

ute

of

Dri

lling

Te

chno

logy

, D

ehra

dun;

W

est

Beng

al

Proj

ect;

A

ssam

Pr

ojec

t an

d D

eep-

Wat

er

grou

p at

M

umba

i. H

e w

as

accl

aim

ed

for

his

perf

orm

ance

in

sp

earh

eadi

ng

the

de

ep

/ult

ra-d

ee

p-

wat

er

cam

paig

n of

O

NG

C

whi

ch

was

ch

rist

ened

‘S

agar

Sa

mri

ddhh

i’.

Smt

Vath

ika

is

the

prop

riet

or

of

M/s

Va

thik

a In

tern

atio

nal

Trav

els,

a

trav

el

agen

cy

whi

ch

aim

s at

cu

stom

izin

g to

ur

pack

ages

of

all

kind

s bo

th

dom

esti

c an

d in

tern

atio

nal.

Smt

Vath

ika

has

been

a

mem

ber

of

Boar

d of

D

irec

tors

of

KC

CI

for

the

last

6

Year

s an

d is

pr

esen

tly

the

Pres

iden

t of

KC

CI.

Shri

Sa

ibal

Ku

mar

D

e ha

s m

ore

than

30

year

s of

w

ork

expe

rien

ce

spre

ad

acro

ss

sect

ors

and

he

has

been

sp

ecifi

cally

as

soci

ated

w

ith

the

infr

astr

uctu

re

sect

or

for

mor

e th

an

last

15

ye

ars.

Sh

ri

Saib

al

Kum

ar

De

has

been

re

spon

sibl

e fo

r th

e c

once

ptua

lizat

ion,

st

ruct

urin

g,

impl

emen

tati

on

and

deliv

ery

of

man

y PP

P pr

ojec

ts

acro

ss

mul

tipl

e se

ctor

s w

hile

w

orki

ng i

n pa

rtne

rshi

p w

ith

the

vari

ous

Stat

e G

over

nmen

ts.

His

ex

tens

ive

expe

rien

ce

in

infr

astr

uctu

re

span

s ac

ross

m

arit

ime

proj

ects

, lo

gist

ics,

ur

ban

infr

astr

uctu

re,

indu

stri

al

park

s,

SEZs

et

c.

Shri

Ve

nkat

esh

is

havi

ng

over

th

ree

deca

des o

f exp

erie

nce

in O

il &

Gas

Sec

tor.

He

is a

ssoc

iate

d w

ith

Man

galo

re

Refin

ery

and

Petr

oche

mic

als

Ltd

(MRP

L) s

ince

199

4 an

d ha

s ex

ecut

ed a

ll m

ajor

pro

ject

s.

He

is a

bus

ines

s le

ader

&

st

rate

gist

w

ith

over

30

ye

ars

broa

d-ba

sed

expe

rien

ce o

f le

adin

g &

tr

ansf

orm

ing

busi

ness

es/

orga

niza

tion

s,

dev

elo

pin

g-m

arke

tin

g-

man

agin

g &

fin

anci

ng

infr

astr

uctu

re

proj

ects

an

d ex

tens

ive

expo

sure

to

bus

ines

s pa

rtne

rshi

ps

wit

h go

vern

men

ts.


13

Mangalore SEZ LimitedQ

ual

ific

atio

nSh

ri A

.K.

Saho

o is

a

Fello

w

Mem

ber

of

the

Inst

itut

e of

Cos

t A

ccou

ntan

ts o

f In

dia.

H

e is

a P

ost

Gra

duat

e in

A

naly

tica

l an

d A

pplie

d Ec

onom

ics

from

Utk

al U

nive

rsit

y,

Odi

sha,

fr

om

whe

re

he a

lso

grad

uate

d in

sc

ienc

e w

ith

a fir

st

clas

s.

Shri

Sha

shi S

hank

er is

a

Petr

oleu

m E

ngin

eer

from

In

dian

Sc

hool

of

M

ines

(IS

M),

D

hanb

ad.

He

also

ho

lds

an M

BA d

egre

e w

ith

spec

ializ

atio

n in

Fi

nanc

e.

He

has

also

re

ceiv

ed

exec

utiv

e ed

ucat

ion

from

pr

esti

giou

s In

dian

In

stit

ute

of

Man

agem

ent,

Lu

ckno

w a

nd I

ndia

n Sc

hool

of

Bu

sine

ss,

Hyd

erab

ad.

Smt.

C

holp

ady

Vath

ika

Kam

ath

hold

s a

Mas

ter’

s D

egre

e in

Bu

sine

ss

Adm

inis

trat

ion

(MBA

) fr

om

Man

ipal

U

nive

rsit

y.

She

has

secu

red

first

ra

nk

and

gold

m

edal

in

M

BA

wit

h fin

ance

as

sp

ecia

lisat

ion

in

the

year

20

11

from

M

anip

al

Uni

vers

ity.

Sh

e ha

s al

so s

ecur

ed

the

best

ou

tgoi

ng

stud

ent

awar

d fr

om

Man

ipal

U

nive

rsit

y.

Mrs

Va

thik

a ha

s se

cure

d fir

st r

ank

and

gold

med

al i

n B.

Com

un

der

Man

galo

re

Uni

vers

ity

in t

he y

ear

2008

-09.

Shri

Sa

ibal

Ku

mar

D

e ha

s do

ne

his

B.

Tech

(C

hem

ical

) fr

om

IIT,

Khar

agpu

r an

d ha

s al

so

done

sho

rt c

ours

es o

n Pr

ojec

t M

anag

emen

t an

d In

fras

truc

ture

Fi

nanc

e &

Pr

ojec

t D

evel

opm

ent

from

IIM

.

Che

mic

al E

ngin

eer

M.A

. (E

cono

mic

s)

from

D

elhi

Sc

hool

of

Ec

onom

ics

(198

5)

and

hold

s M

aste

rs

in

Busi

ness

A

dmin

istr

atio

n fr

om

Indi

an

Inst

itut

e of

M

anag

emen

t (II

M)

Luck

now

w

ith

spec

ializ

atio

n in

M

arke

ting

an

d Fi

nanc

e (1

987)

.

List

of

oth

er

com

pan

ies

in w

hic

h

dir

ecto

rsh

ip

is h

eld

as

on

M

arch

31,

20

18*

1.

Man

galo

re

Refin

ery

and

Petr

oche

mic

als

Lim

ited

(M

RPL)

2.

ON

GC

Man

galo

re

Petr

oche

mic

als

Lim

ited

(O

MPL

)

1.

Oil

and

Nat

ural

G

as

Cor

pora

tion

Lt

d. (

ON

GC

)2.

O

NG

C

Vid

esh

Lim

ited

(O

VL)

3.

Man

galo

re

Refin

ery

and

Petr

oche

mic

als

Lim

ited

(M

RPL)

4.

ON

GC

Pe

tro

addi

tion

s Li

mit

ed

(OPa

L)5.

O

NG

C

Trip

ura

Pow

er

Com

pany

Li

mit

ed (

OTP

C)

6.

ON

GC

Man

galo

re

Pe

tro

che

mic

als

Li

mit

ed (

OM

PL)

7.

Petr

onet

LN

G L

td

(PLL

)

1.

Kana

ra

Cha

mbe

r of

C

omm

erce

an

d In

dust

ry

1.

IL&

FS M

arit

ime

Infr

astr

uctu

re

Com

pany

Ltd

2.

Ba

laji

Infr

a Pr

ojec

ts

Ltd

3.

IMIC

L D

ighi

M

arit

ime

Ltd

4.

Port

o N

ovo

Mar

itim

e Lt

d5.

IL

&FS

wat

er L

td

6.

IL&

FS P

arad

ip

Refin

ery

Ltd

7.

Guj

arat

Inte

grat

ed

Mar

itim

e C

ompl

ex

Pvt

Ltd

8.

Seal

and

War

ehou

sing

Pvt

. Lt

d9.

V

izag

Agr

ipor

t Pv

t.

Ltd

10. I

ndia

Tou

rist

&

Her

itag

e V

illag

e Pv

t. L

td.

Dir

ecto

rshi

ps h

eld

as

at 2

5th J

une

2018

.1.

M

anga

lore

Re

finer

y an

d Pe

troc

hem

ical

s Lt

d2.

O

NG

C M

anga

lore

Pe

troc

hem

ical

s Li

mit

ed3.

Pe

tron

et M

HB

Lim

ited

4.

Shel

l MRP

L A

viat

ion

Fuel

and

Se

rvic

es L

imit

ed

1.

Urb

an M

ass

Tran

sit

Com

pany

Lim

ited

2.

Utt

arak

hand

In

fras

truc

ture

Pr

ojec

ts C

ompa

ny

Lim

ited

3.

Beng

al U

rban

In

fras

truc

ture

D

evel

opm

ent

Lim

ited

4.

And

hra

Prad

esh

Urb

an In

fras

truc

ture

A

sset

Man

agem

ent

Ltd

5.

PDC

OR

Lim

ited

6.

Man

galo

re S

TP

Lim

ited

7.

MSE

Z Po

wer

Lim

ited


14

Ch

airm

an /

Mem

ber

of

the

Co

mm

itte

es

of

the

Bo

ard

o

f th

e o

ther

C

om

pan

ies

in

wh

ich

he

/ sh

e is

a d

irec

tor

as

on

Mar

ch 3

1,

2018

*

Man

galo

re R

efin

ery

and

Petr

oche

mic

als

Lim

ited

– M

embe

r of

Sta

keho

lder

s Re

lati

onsh

ip

Com

mit

tee.

ON

GC

Man

galo

re

Petr

oche

mic

als

Lim

ited

– M

embe

r of

A

udit

Com

mit

tee.

Nil

Nil

IMIC

L D

ighi

Mar

itim

e Lt

d –

Mem

ber

of A

udit

C

omm

itte

e.

Shel

l MRP

L A

viat

ion

Fuel

and

Ser

vice

s Lt

d –

Aud

it C

omm

itte

e m

embe

r.

1.U

rban

mas

s Tr

ansi

t C

ompa

ny

Ltd-

mem

ber

of a

udit

C

omm

itte

e2.

Utt

arak

hand

In

fras

truc

ture

Pro

ject

s C

ompa

ny L

td-

mem

ber

of s

hare

allo

tmen

t an

d tr

ansf

er c

omm

itte

e

Equ

ity

Shar

es

hel

d in

th

e C

om

pan

y

Nil

Nil

Nil

Nil

Nil

500

Rel

atio

nsh

ip

bet

wee

n

Dir

ecto

rs in

ter-

se

Nil

Nil

Nil

Nil

Nil

Nil

* D

irec

tors

hips

and

Com

mit

tee

mem

bers

hips

in M

anga

lore

SEZ

Ltd

and

its

Com

mit

tees

are

not

incl

uded

in t

he a

fore

said

dis

clos

ure.

The

dir

ecto

rshi

ps in

Pri

vate

Lim

ited

C

ompa

nies

, For

eign

Com

pani

es a

nd S

ecti

on 8

com

pani

es a

nd t

heir

Com

mit

tee

mem

bers

hips

are

exc

lude

d. M

embe

rshi

p an

d C

hair

man

ship

of

Aud

it C

omm

itte

es a

nd

Stak

e ho

lder

s’ r

elat

ions

hip

Com

mit

tees

of

only

pub

lic C

ompa

nies

hav

e be

en in

clud

ed in

the

afo

resa

id t

able

.


15


Dear Members,Your Directors are pleased to present the 12th Annual Report of the Company for the year ended 31st March, 2018.

Financial Performance:

The highlights of the financial results of the Company for the year ended 31st March, 2018 are as follows:

Rs. in Crores

Standalone Consolidated

Particulars 2017-18 2016-17 2017-18 2016-17

REVENUE:

Income from operations 174.23 128.52 174.23 128.52

Other Income 3.14 6.20 3.14 6.20

Total Revenue 177.37 134.72 177.37 134.72

EXPENSES:

Employee Benefit Expenses 8.10 6.69 8.10 6.69

Finance Costs 50.90 53.35 50.90 53.35

Depreciation and amortization expense 41.46 29.33 41.46 29.33

Other Expenses 65.99 36.21 65.99 36.21

Total Expenses 166.45 125.58 166.45 125.58

Profit Before Exceptional items and tax from con-tinuing operations

10.92 9.14 10.92 9.14

Profit Before Tax 10.92 9.14 10.92 9.14

Tax Expense - Current Tax 7.87 1.99 7.87 1.99

Tax Expense - Deferred Tax (0.61) 13.14 (0.61) 13.14

Profit for the period from continuing operations

3.66 (5.99) 3.66 (5.99)

Profit/Loss & Tax from Discontinued operations - - - -

Profit / (Loss) for the period 3.66 (5.99) 3.66 (5.99)

Other Comprehensive Income 0.01 (0.14) 0.01 (0.14)

Total Comprehensive Income 3.67 (6.13) 3.67 (6.13)

Review of Performance and state of the company’s affairs

During the year under review, the standalone revenues (operations) have increased by 35.56% to Rs.174.23 Cr from Rs.128.52 Cr of the previous year 2016-17, while the comprehensive income has increased to Rs.3.67 Cr compared to Rs (6.13) Cr of the previous year 2016-17.

The Company has substantially completed infrastructure development (~98%) for Phase–I of the Project. The salient features of the infrastructure development in the previous year are as under:

• Up to 31st March 2018, the Company has awarded 158 major orders cumulatively amounting to Rs.829.66 Cr towards infrastructure development within SEZ out of which 137 work orders cumulatively amounting to Rs.760.14 Cr have been satisfactorily concluded. The balance 21 orders are under various stages of execution.

BOARD'S REPORT


16

• The 3.00 MLD capacity Common Effluent Treatment Plant has been completed and commissioned during the year and is receiving and treating effluent from the fish processing industries in the zone.

• Consultancy contract for proposed technical appraisal of expansion of CETP to 6.00 MLD has been awarded to NEERI, Hyderabad. The expansion activity will be undertaken upon completion of technical appraisal.

• The consultancy assignment for carrying out detailed engineering and estimation for the proposed barrage at Jakhribettu has been awarded and the construction work will be undertaken based on the DPR under preparation by the consultant.

• Detailed engineering is under way for replacement of UF membranes at the existing Tertiary Treatment Plant (TTP) and the membranes are proposed to be procured and installed through global tenders.

• The JV Company Mangalore STP Limited (MSTPL) jointly promoted by the company and Mangalore City Corporation (MCC) has successfully operated the associated wet wells and Kavoor STP from January 2014 through O&M operator GET Water Solutions, Chennai, up to 30th September 2017. M/s Pooja Construction Co, Rajkot has been selected through open bidding process to provide O&M services for a period of 3 years from 1st October 2017.

• The pipeline corridor from New Mangalore Port Trust (NMPT) to MSEZ has been completed and OMPL and ISPRL have already laid their pipelines on the corridor in their allocated space. Further, M/s GAIL have also been allocated space to lay their pipeline up to MRPL on the corridor.

• The Road flyover across Konkan Railway Corporation Limited (KRCL) railway track near Jokatte taken up with a grant of Rs.15 Cr from Government of Karnataka (GoK) under Assistance to States for Infrastructure Development of Exports (ASIDE) scheme is completed except for the obligatory span over the railway track which is being executed by KRCL themselves. The flyover is expected to be completed in all respects and thrown open to traffic by Q3-2018.

• Treated effluents from MRPL and OMPL are being discharged to the marine environment by complying with all the statutory compliances through the marine outfall facilities completed and commissioned by MSEZL in 2014. JBF has also entered into an agreement for utilizing the marine outfall facility with a minimum guaranteed discharge clause. MSEZL has obtained the Consent for Operation (CFO) from Karnataka State Pollution Control Board (KSPCB) for operating this facility and has also installed online analysers to monitor the discharge of treated effluents on real-time basis.

• MSEZL has completed construction of all the power infrastructure consisting of 110/33/11 KV Grid Substation and laid transmission lines for tapping power from 220 KV MRSS. 33 KV and 11 KV cables and remote metering units (RMU) have also been installed along the roads in the zone for distributing power to the units. Further, street lighting has also been completed in the Zone.

• River water treatment plant of 60 MLD capacity along with a 120ML storage reservoir have been commissioned and treated water is being supplied to SEZ units. Site grading of ~505 acres of land has been completed and internal roads and storm water drainage system have also been developed in the zone.

• The consultancy contract awarded to M/s URS Scott Wilson India Private Limited in June 2013 ended in September 2017 and MSEZL has been carrying out the entire project management functions for infrastructure development on its own thereafter.


17


Land Acquisition

• The land required for the Project has been acquired through Karnataka Industrial Areas Development Board (KIADB). A total land of 2353.23 acres has been acquired including 251.23 acres of land for MRPL, 1619.75 acres for SEZ and balance for R&R Colony, Corridor and other requirements viz., ISPRL’s booster station, road widening, water infrastructure and exchange with forest land etc., & 1619.75 acres of land has already been notified for SEZ.

Update on Permissions & “Right of Way”.

• MSEZ Phase I has been notified as a Multi product SEZ since Sept ’13, thus upgrading the sector specific SEZ status for Petroleum & Petrochemicals accorded by Ministry of Commerce & Industry (MoCI) on 30th July 2007. With the first unit Cardolite Speciality Chemicals India LLP and second unit OMPL becoming operational in 2014, MSEZ is recognised as being ‘operational’ and COD is declared effective from 01st April 2015.

• MSEZ Phase I project has obtained Environment clearance from MoEF and Consent for Establishment from KSPCB in 2008. MSEZ has now received the amendment to Environment clearance for allowing Downstream Petrochemical units in lieu of Olefin complex in Phase I area as well as extension to CFE from KSPCB. MSEZL had obtained amendment to Environment Clearance from Ministry of Environment and Forests for permitting Multi-Product SEZ on 18.06.2015. MSEZL has obtained Right of Way from Public Works Department, GoK, National Highways, Zilla Panchayat, Mangalore for laying ~42 kms length of River water pipeline from Netravathi river to MSEZL.

• MSEZL has taken on lease, the land required for Pipeline-cum-Road Corridor from New Mangalore Port Trust (NMPT), Kudremukh Iron Ore Company Ltd (KIOCL) and the balance land required for the corridor is acquired by the company. The Company has already entered Tripartiate agreements with MRPL, OMPL for development and utilisation of Corridor. The Company has also entered into agreements with GAIL India Ltd & Emami Agrotech Ltd for utilisation of Corridor.

Rehabilitation and Resettlement (R&R) of Displaced People

• Allotment of plots for Project Displaced families (PDFs) continued by developing the balance R&R colonies. Overall, 1424 plots have been planned to be developed in 10 R&R colonies. All the 10 R&R colonies have been fully developed (48.16, 18, 9.58 & 9.88 acres at Kulai, 16 acres at Permude, 4 acres at Kalavar, 1.58 acres at Rampal, 35 acres at Bajpe, 69 acres at Thokur and 6.48 acres at Bajpe). In all, 1391 plots have already been handed over to the PDFs thus far leading to the company evacuating 1235 families out of 1253 PDFs in the acquired land. Balance 18 families are proposed to be evacuated shortly.

• As a part of the implementation of the Government Order for R&R activities, out of the total no of 1628 eligible PDF candidates for employment, onetime compensation has been paid to 868 candidates and balance 760 are to be provided employment. Out of the 760 candidates 589 candidates have been provided employment and balance 171 are yet to be placed. Payment of Stipend & Sustenance allowance to PDF nominees, who have not opted for the ex-gratia is continuing.

• Based on the directions issued by the R&R Committee chaired by the Deputy Commissioner, Dakshina Kannada District, a limited period window of 3 months was opened to the PDFs to avail enhanced cash compensation as a one-time exit option in lieu of jobs from 01st Aug ’17 to 31st Oct ’17. The window was again opened for a period of 2 months from 01st Jan ’18 to 28th Feb ’18. 42 PDFs have availed cash compensation in lieu of jobs during the period.


18

Infrastructure Development

• During the year under review, the Company has completed substantial development of infrastructure for Phase-I. The Company has incurred expenditure of Rs.1491 Cr as against Rs.1707 Cr towards Land, R&R, infrastructure development and proponents’ share of corridor as on 31st March, 2018.

• Additional infrastructure development works viz., Construction of Common Effluent Treatment Plant and Flyover across Konkan Railway Track near Jokatte village axcepting the obligatory span over the railway track taken up with a grant of Rs.20 crores under ASIDE Scheme from the State Govt. of Karnataka are completed.

Corridor

• The pipeline-cum-road Corridor of approximate 11.45 km length from NMPT to MSEZ area has been developed in six construction packages and completed.

• The entire stretch of ~11.45 km was handed over to OMPL during the 2016 for laying their pipelines which has been completed as on date. OMPL has commenced exporting its products through this pipeline from October, 2014.

• The company has allocated 1 metre space to GAIL, 0.65 metre space to Emami for laying its pipelines and is in discussion with prospective investors for leasing the balance corridor space.

Water

MSEZ water requirements are being sourced as follows:

(i) The Company has approvals in place for drawal of 27 MGD of River water from Netravathi and Gurupur rivers. The Company is presently pumping the river water from sarpady to OMPL & MRPL and other units since October 2013.

(ii) During the year, the Company has signed agreement for supply of river water to the extent of 1 MGD with various units such as Ulka, Gadre Marine exports, Yeshaswi etc.

(iii) The Company has generated a revenue of Rs.103.92 Cr from supply of water during the FY 2017-18.

(iv) MSEZL is in process of getting designs for Jakribettu barrage through a specialized agency after which the company will take up construction of the barrage which will take another 2 years for completion.

(v) The company is in the process of taking over the Bajal STP from MCC as per the agreement and also will take up the pipe line connectivity between Bajal STP to Kavoor STP to augment the TTP water from existing 5 MGD capacity to 9 MGD. Further the company is in the process of expanding the TTP capacity from present 5 MGD to 10 MGD.

Power

• The Company has Completed the 33 KV and 11 KV loop lines to facilitate connection up to the battery limits of the units.

• The Company has filed review petition against the ARR and Tarriff order for FY 2017-18. The Karnataka Electricity Regulatory Commission (KERC) vide its order dated 26th October 2017 has allowed the Company to carry forward the net revenue deficit of Rs.3.91 Cr into the ARR of FY 2018-19. During the year under review, your Company has filed before KERC for approval of Annual Performance Review (APR) for FY 2016-17, Annual Revenue Requirement (ARR) for FY 2018-19 and to determine retail supply tariff for FY 2018-19.


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• The Board and share holders of the company have approved for the transfer of the entire Power distribution activity including the assets and liabilities pertaining to power distribution business of Mangalore SEZ Limited in favour of MSEZ Power Limited (MPL), a Wholly Owned Subsidiary of the Company, on a Slump Sale basis, at a fair value of Rs.27.09 Cr. The Company has obtained KERC approval required for the transfer of the assets and is in the process of evaluating the capital structure for transfer of the power distribution activity.

Environment

• The Company is complying with the prescribed conditions and submitting the Compliance reports as per the Environmental Clearance conditions to the Ministry of Environment & Forests (MoEF) and Karnataka State Polution Control Board (KSPCB) as stipulated.

• Your Company has also obtained Consent for Operation for marine outfall in August, 2014.

• The Company has taken up and Completed construction of Common Effluent Treatment Plant in SEZ and the same is operational since September 2017. The Company is in the process of augmenting from 3 MLD to 6 MLD.

• The company has installed an online ambient air quality monitoring station as mandated by MoEF & Pollution Control Board. The online monitored data is continuously uploaded to Central Pollution Control Board website.

Common Effluent Treatment Plant (CETP):

• The company to comply with the statutory requirements and also to make MSEZ fully operational has constructed 3.0 MLD capacity of CETP as a part of MSEZ Phase I of the Project. The plant has been commissioned during FY 2017-18. The present estimated demand for treatment of process waste water exceeds the existing capacity as the company has recently leased land to fish processing and export industries like (i) Authentic Ocean Treasure, (ii) Ulka India (iii) Gadre Marine Exports and (iv) Yashaswi Fish Meal and Oil company who have indicated their CETP requirement in the range of 3.00 MLD initially and scalable to 5.75 MLD. Therefore, to cater to additional demand, the company is in the process of carrying out detailed engineering for expanding the CETP from present 3.00 MLD capacity to 6.00 MLD upon completion of technical appraisal.

Green Belt Development

• As per environment clearance & amendments thereto, out of around 1620 acres land notified, MSEZ need to develop green belt excluding OMPL and ISPRL green belt requirements which are developed by respective units. MSEZL so far developed green belt in 237 acres by planting 1,00,500 saplings in processing and non-processing areas.

• Green belt development along with avenue plantation has been taken up in 30 acres during the year. Beautification works to enhance the aesthetic outlook like land scape gardening in and around utilities and along the road median have been taken up during 2017-18 and completed the beautification of Fire station, Road median and environmental data display board surrounding area. The remaining areas will be completed during the next FY 2018-19.

• MSEZ has created own nursery to meet the requirement of ornamental and flowering plants in side MSEZ and saplings are developed in situ.

• MSEZ has distributed More than 1500 saplings of different tree species to general public, schools and Industrial Units inside the zone.


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Marketing Initiatives

• During FY 2017-18, MSEZL has participated in 19th Japan International Seafood & Technology Expo from 23rd to 25th August 2017 at Tokyo, Japan for networking with leading Seafood exporters from India and International sector for marketing the Land.

• The Company has participated at the Invest Karnataka Meet held in November 2017 at Bangalore International Exhibition Center, Bengaluru.

• To promote the leasing of the land, the company has put in place success fee of 1% to those entities who successfully markets the land to the prospective investors.

• During FY 2017-18, MSEZL has leased around 51.57 Acres of land in SEZ and Non SEZ area to the following Industries:

(a) Syngene International Ltd : 6.35 acres

(b) Emami Agrotech Ltd : 43.25 acres

(c) Authentic Ocean Treasure : 1.00 acres

(d) ULKA India : 0.97 acres

During the year under review, the Company has also signed an MOU with M/s Orient Source HK Limited, a Hong Kong based company, a global leader in Commodity Trading & Logistics, for leasing out 121.444 acres of land. The transaction will come into force after completion of due diligence of 3 months and the party has sought further time to complete its due diligence.

Apart from this, discussions are on-going with various prospective investors for allotment of additional land and expect to close few more deals in the forth coming year.

Since MSEZ turned Multi Product, efforts are being directed towards the targeted sectors suitable for investments in SEZ. These sectors include the Chip manufacturer, Tankage industries, Cold Storage, Mass Housing, Food Processing Industries along with petrochemical, pharma and other allied industries.

Administrative Matters

The Registered office of the Company is at 3rd Floor, MUDA Building, Ashok Nagar, Urwa Stores, Mangalore – 575 006.

The Project site of the company is at Bajpe, Permude Village, Mangalore – 574 509, Dakshina Kannada (Dist), Karnataka.

The total strength of the employees as at March 31, 2018 is 48.

The company has in place a HR policy which has been approved by the Board.

Units in SEZ

The Company has leased land to 12 Units in the SEZ. Presently, 4 companies viz ONGC Mangalore Petrochemicals Limited (OMPL), Indian Strategic Petroleum Reserve Limited (ISPRL), Authentic Ocean Treasure (AOT) and Cardolite Specialty Chemicals India LLP (Cardolite) has already commenced its operations, while the other 8 entities are in the process of setting up units in the SEZ and are in different stages of implementation. The 8 entities are JBF Petrochemicals Limited (JBFPL), Syngene International Ltd (Syngene) (a subsidiary of M/s Biocon Ltd), Anthea Aromatics Pvt. Ltd (Anthea), Trident Infrastructure Ltd (Trident), Ulka India (ULKA), Gadre Marine Exports Pvt. Ltd (Gadre), IMC and Yashaswi Fish Meal and Oil Company (Yashaswi).


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Share Capital

During the period under review there is no change in the authorised and paid up capital of the Company. The authorised share capital is Rs.425,00,00,000 and paid up share capital is Rs.50,00,12,000.

The Company has not issued any shares with differential rights and hence no information as per provisions of Section 43(a) (ii) of the Companies Act, 2013 read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 is furnished.

Dividend

No dividend is being recommended by the Company for the year ended 31st March, 2018 and no amount has been transferred to General Reserve during the FY 2017-18.

Credit Rating

The Company had obtained domestic credit rating from

a. CARE for the term loan of Rs.706.00 Cr. CARE has assigned a rating of AA - (Double A minus) with outlook as stable on 28th August 2017. The rating was reaffirmed on 08th March, 2018.

b. ICRA Limited for the term loan of Rs.706.00 Cr. ICRA Limited has upgraded its rating from A+ (Pronounced as ICRA A+) to ICRA AA- (Pronounced as ICRA double A minus) vide letter dt 06th April 2018.

Declaration of Commercial Operation Date (COD)

The Company has achieved the Commercial Operations Date (COD) with effect from April 01, 2015.

Credit Facilities

The company has Term Loan facility of Rs.585 Cr from State Bank of India (Refinanced from consortium of 7 Banks lead by Indian Overseas Bank). The outstanding amount as at 31st March 2018 is around Rs.574.11 Cr.

The Company has achieved reduced interest rate of 8.20 % p.a on the strength of improved credit rating of AA - from CARE and annual reset of MCLR on the Credit facilities of SBI;

The Company has also tied up with Corporation Bank for the Sub project aggregating Rs.121 Cr. The Company will avail the facilities on need basis.

Financial Accounting

Your Company’s financial statements for the year ended March 31, 2018 are prepared in accordance with Ind AS notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016, as applicable.

Consolidated Financial Statements

The Annual Audited Consolidated Financial Statements together with Auditors’ report thereon form part of annual report. These documents will also be available for inspection during business hours at the registered office of the Company.


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The Company has the following Two Subsidiaries:

1. Mangalore STP Limited (MSTPL)

Mangalore STP Limited is a Special Purpose Company registered under the Companies Act, 2013 on 24th March 2011. The main object of the Company is to undertake the O&M of the 3 sewage treatment plants and connected wet wells on Cost sharing basis in the ratio of 70:30 between the Company and MCC. The shareholding is held by Mangalore SEZ Limited (70%) and Mangalore City Corporation (MCC) (30%).

MSTPL presently operates the Kavoor STP and its associated wet wells plus wet well 6 and 7 of Bajal STP which were taken over from MCC for efficient operation & maintenance.

The Company has engaged M/s Pooja Construction Co, Rajkot as the O&M operator for a period of 3 years effective from 01st October 2017. MSTPL has been supplying STP water to MSEZ on a regular basis.

During the year under review, the revenues from operations stood at Rs.5.82 Cr as compared to Rs.3.88 Cr during the FY 2016-17. The comprehensive income is Nil in the current year and Previous year.

2. MSEZ Power Limited (MPL)

MSEZ Power Limited is a 100% Subsidiary of the company formed with the prime objective of distribution of Power to the units in MSEZL. This Subsidiary will commence its operations once the power distribution segment currently vesting with Mangalore SEZ Ltd (MSEZL) is transferred to MPL. The Company has obtained all the requisite approvals for transferring the Power Distribution Business to MPL and is presently evaluating the Capital structure for transfer of the said business. MPL has also been granted a Co-Developer Status from the Ministry of Commerce and Industries on May 19, 2015.

During the year under review, the company had other revenues income of Rs.33,416 as compared to Rs.31,841 during the FY 2016-17. The comprehensive Loss for the period is Rs.16,924 compared to profit of Rs.6,185 in the Previous year.

The statement containing the salient features of the financial statement of a company’s subsidiaries under the first proviso to sub-section (3) of section 129 of the Companies Act, 2013 is annexed in form AOC-1 as Annexure VI.

Directors & Meetings of the Board

Four meetings of the Board of Directors were held during the year. The details of the meetings have been furnished in the Corporate Governance report annexed to this report as Annexure-II.

Directors and Key Managerial Personnel - changes during the financial year 2017-18:

Change in Directors (Resignations):

1. Shri Santosh Nautiyal resigned as Independent Director of the Company w.e.f 29/04/2017.

2. Shri Pankaj Kumar Pandey resigned as Director of the company w.e.f 19/08/2017

3. Shri Dinesh Kumar Sarraf resigned as Director and Chairman of the Company w.e.f 01/10/2017.

4. Shri Jeevan Saldanha resigned as Director of the Company w.e.f 04/11/2017.

5. Shri Pradeep Puri resigned as Director of the Company w.e.f 23/11/2017.

Your Directors wish to place on record their sincere appreciation for the valuable services rendered by Shri Dinesh Kumar Sarraf, Shri Santosh Nautiyal, Shri Pankaj Kumar Pandey, Shri Jeevan Saldanha and Shri Pradeep Puri during their association with the Company.


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Change in Directors (Appointments)

The following persons were appointed as Directors during the year

1. Shri Paritosh Kumar Gupta was re-appointed as Managing Director of the company for a period of 1 year w.e.f 19/05/2017.

2. Shri Shashi Shanker was appointed as an Additional Director (Nominee of ONGC) and Chairman of the Company w.e.f 16/10/2017.

3. Smt. C. Vathika Kamath was appointed as an Additional Director (Nominee from KCCI) of the company w.e.f 14/11/2017.

4. Shri Saibal Kumar De was appointed as an additional Director (Nominee from IL&FS) of the company w.e.f 22/12/2017.

Proposed Appointments:

a. Re-appointments of Directors at the 12th AGM:

The following re-appointments to the Board are proposed:

Approval of the shareholders is being sought for the re-appointment of Shri A.K. Sahoo, Director of the Company, who retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer himself for re-appointment in accordance with the provisions of the Companies Act, 2013 and pursuant to Articles of Association of the Company. Your Board recommends his re- appointment.

b. Appointments of Directors at the 12th AGM:

Shri Shashi Shanker (DIN: 06447938) was inducted as an Additional Director and Chairman on the Board w.e.f October 16,2017. As per the provisions of Section 161 of the Companies Act, 2013, he holds office only up to the date of the Annual General Meeting of the Company. Approval of the Shareholders is being sought for his appointment as (Nominee of ONGC) Director (Non-Executive) in the ensuing Annual General Meeting pursuant to the provisions of the Section 160 of the Companies Act, 2013. Being eligible, the Board recommends his appointment.

Smt. C. Vathika Kamath (DIN: 05351602) was inducted as an Additional Director on the Board w.e.f November 14, 2017. As per the provisions of Section 161 of the Companies Act, 2013, she holds office only up to the date of the Annual General Meeting of the Company. Approval of the Shareholders is being sought for her appointment as (Nominee of KCCI) Director (Non-Executive) in the ensuing Annual General Meeting pursuant to the provisions of the Section 160 of the Companies Act, 2013. Being eligible, the Board recommends her appointment.

Shri Saibal Kumar De (DIN: 00498241) was inducted as an Additional Director on the Board w.e.f December 22, 2017. As per the provisions of Section 161 of the Companies Act, 2013, he holds office only up to the date of the Annual General Meeting of the Company. Approval of the Shareholders is being sought for his appointment as (Nominee of IL&FS) Director (Non-Executive) in the ensuing Annual General Meeting pursuant to the provisions of the Section 160 of the Companies Act, 2013. Being eligible, the Board recommends his appointment.

Shri Venkatesh Madhava Rao (DIN: 07025342) was inducted as an Additional Director on the Board w.e.f June 25, 2018. As per the provisions of Section 161 of the Companies Act, 2013, he holds office only up to the date of the Annual General Meeting of the Company. Approval of the Shareholders is being sought for his appointment as (Nominee of ONGC) Director (Non-Executive) in the ensuing Annual General Meeting pursuant to the provisions of the Section 160 of the Companies Act, 2013. Being eligible, the Board recommends his appointment.


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c. Re-appointment of Managing Director at the 12th AGM:

Based on the recommendation of the Nomination and Remuneration Committee, Shri Paritosh Kumar Gupta (DIN: 01054182) was re-appointed as Managing Director by the Board of Directors on 14th May 2018 for a period of 1 Year effective from 19th May 2018. Approval of the Shareholders is being sought for his re-appointment as Managing Director in the ensuing Annual General Meeting pursuant to the provisions of the Section 196, 197, 203 and other applicable provisions if any, of the Companies Act 2013 (“The Act”) read with Schedule V of the Act and the Companies (Appointment and Remunerations of Managerial Personnel) Rules, 2014. The Board recommends his re-appointment.

Declarations by Independent Directors:

The Company has received declarations form the Independent Directors under Section 149(6) of the Companies Act, 2013 confirming their independence vis-à-vis the Company.

Directors’ Responsibility Statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act, 2013, your Directors confirm that:

a) the applicable accounting standards have been followed along with proper explanations relating to material departures, if any, for preparation of the annual accounts;

b) the accounting policies have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended March 31, 2018 and of the profit and Loss of the Company for that period.

c) proper and sufficient care has been taken to maintain adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud or other irregularities;

d) the annual accounts have been prepared on a going concern basis.

e) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Governance

The report on Corporate Governance is annexed to this report as Annexure-II.

Contracts and Arrangements with Related Parties

Related party transactions that were entered during the financial year are on arm’s length basis and were in the ordinary course of business excepting one transaction relating to payment of administrative fees to IL&FS for providing Sponsor Support Undertaking. There were no materially significant related party transactions with the Company’s Promoters,Directors, Management or their relatives, which could have a potential conflict with the interests of the Company. Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its review. The particulars of contracts entered during the year with the Related Parties in the prescribed Form AOC-2 are enclosed as Annexure-III.

Corporate Social Responsibility (CSR) initiatives

As a socially responsible organization, MSEZL is committed to the well-being of the communities around the SEZ area and with this objective the Company has taken up a number of schemes / development activities during the FY 2017-18. These activities pertain to the areas of education, water supply, sanitation, community and social development.


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As required under the Companies Act, 2013, the Company is required to spend at least 2% of the average net profits in the immediately three preceding years. The average profit before tax for the last three years viz., 2014-15, 2015-16 and 2016-17 was Rs.9.19 crores; 2% of which was Rs 18.38 Lakhs.

Your Company has spent Rs.32.11 Lakhs during the FY 2017-18 which covers the CSR expenditure of FY 2017-18, 2016-17 and 2015-16 as per the following details:

a. Rs.6.35 Lakhs pertains to CSR expenditure earmarked for FY 2015-16

b. Rs.6.73 Lakhs pertains to CSR expenditure earmarked for FY of 2016-17 and

c. Rs.19.02 Lakhs pertains to CSR expenditure of 2017-18.

As against the CSR budget of Rs.18.38 Lakhs, the Company has spent an amount of Rs.19.02 Lakhs, which is in excess by Rs.0.64 Lakhs for FY 2017-18.

In addition to the above referred CSR spend, during the year,

a. the Company has also Completed the Infrastructure works for the Community Hall in Thokur at an expenditure of Rs.6.73 Lakhs, which pertains to the CSR activities of FY 2016-17.

b. the Company has also Completed the Construction of Gents & Ladies Toilet at Govt Pre University College, Siddakatte, Bantwal (Tq), Dakshina Kannada Dist, Mangalore at an expenditure of Rs.6.35 Lakhs, which pertains to the CSR activities of FY 2015-16.

A report on the CSR activities for FY 2017-18 is provided as an Annexure-IV to this report.

Risk Management

The Risk Management Policy has been adopted for the organization by the Board. The Risk Management Committee reviews various types of risks whether present or future and updates the risk register. The Management appraises the same to the Audit Committee periodically.

Internal Financial Control Systems and their Adequacy:

Your Company has in place a Policy on Internal Financial Controls. The Audit Committee is regularly reviewing the Internal Audit Reports for the auditing carried out in all the key areas of the operations. Additionally, the Audit Committee reviews the significant issues raised by the Internal and External Auditors. Regular reports on the business development, future plans and projections are given to the Board of Directors. Internal Audit Reports are regularly circulated for perusal of Senior Management for appropriate action as and when required.

Normal foreseeable risks of the Company’s assets are adequately covered by comprehensive insurance, risk assessments, inspections and safety audits are carried out periodically.

Statutory Auditors

M/s Maharaj N R Suresh & Co., Chartered Accountants, Statutory Auditors holds their office until the conclusion of the 12th Annual General Meeting of the Company. The firm has completed a tenure of 5 years as Statutory Auditors of the Company. Although eligible for another term of 5 years, the Board opined that as a prudent Corporate Governance practice, the statutory auditors have to be rotated after completion of their term of 5 Years.

The Board of Directors based on the recommendation of the 37th Audit Committee have recommended for appointment for M/s Ray & Ray, Chartered Accountants bearing Firm Registration No.301072E as Statutory Auditors of the Company for a period of 5 Years. subject to approval of the members at the 12th AGM.


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As required under Section 139 of the Companies Act, 2013, the Company has obtained a written consent from M/s Ray & Ray, Chartered Accountants to such appointment and also a certificate to the effect that their appointment, if made, would be in accordance with Section 139(1) of the Companies Act, 2013 and the rules made there under. Appropriate resolutions form part of the agenda at the ensuing Annual General Meeting.

Internal Auditors

The Board of Directors have appointed M/s. Chokshi & Chokshi LLP, Chartered Accountants as Internal Auditors of the Company for the financial year 2017-18.

Auditors’ Report

The report of the Auditors of the Company and notes to the accounts are self-explanatory and therefore do not call for any further comments and may be treated as adequate compliance of Section 134(2) of the Companies Act, 2013.

The Auditors’ Report is un qualified and do not have any qualifications / emphasis matters.

Secretarial Audit

The Board has appointed M/s P.N. Pai & Co, Company Secretaries to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed herewith and marked as Annexure-I to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Evaluation of Board

The provisions of Section 134 (3) (p) of the Companies Act, 2013 read with rule 8(4) of the companies (Accounts) rules, 2014 requires every listed company and every other public company having paid-up share capital of Rs.25 Cr or more shall include a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

Accordingly, based on the criteria of Board evaluation approved by the Nomination and Remuneration Committee (NRC), the Board of Directors have evaluated the performance of Board, Managing Director, Non-Executive and Non-Independent Directors, Committees of Board and Independent Directors of the Company. A consolidated report was submitted to the Nomination and Remuneration Committee and to the Board for its review. The Nomination and Remuneration Committee reviewed the consolidated report on Evaluation and noted the % of rating obtained against each category by the Directors. Based on the % of rating obtained, the NRC has recommended for continuation of all Directors to the Board. The Consolidated report on the performance of Board, Managing Director, Non-Executive and Non-Independent Directors, Committees of Board and Independent Directors was placed for review and noting by the Board. The Board reviewed and noted the Consolidated report on performance evaluation and recommendations of the NRC.

Meeting of Independent Directors

A Separate meeting of the Independent Directors was held on July 21, 2017, inter-alia, to discuss the evaluation of performance of Non-Independent Directors, the Board as a whole, evaluation of the performance of the Chairman and the evaluation of the quality, content and timelines of flow of information between the management and the Board that is necessary for the Board to effectively and reasonably perform its duties. The Independent Directors expressed satisfaction over the same.


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Disclosures:

Audit CommitteeConsequent to the resignation of Shri Santosh Nautiyal as Independent Director, the Board at its 49th meeting held on 11th May 2017 had re-constituted the Audit Committee with following Directors as its members. The constitution consists of majority of members as Independent Directors, as required under section 177 of the Companies Act, 2013. The details of the Terms of reference are provided in the Corporate Governance Report.

Name of Director Designation

Shri Srinivas S Kamath Chairman and Independent DirectorShri ISN Prasad Independent DirectorShri A.K. Sahoo Member

Matters recommended by the Audit Committee and reasons for not accepting by the Board.

1. The 32nd Audit Committee recommended for Increase of Stipend and Sustenance allowance by Rs.1,000 across each category, but the 49th Board opined that increasing Sustenance allowance along with opening limited period window for enhanced exit option may make the exit option unviable.

2. The 32nd Audit Committee has recommended for not charging interest on the outstanding payments till 31st March 2018 as per the proposal made by the JBF vide letter dt 26th April 2017 for settlement of water dues, but the 49th Board has approved for charging interest as per the terms of the water agreement.

3. The 33rd Audit Committee has recommended the proposal made by the JBF vide letter dt 12th June 2017 for settlement of water dues and the 50th Board has approved the said proposal excepting that the Interest shall be levied as per the water agreement on the 25 instalments proposed by JBF. However, if the JBF pays all the 25 instalments without default, then the additional interest levied will be adjusted or reduced in the tail end Instalment amounts.

Corporate Social Responsibility CommitteeConsequent to the resignation of Shri Santosh Nautiyal as Independent Director, the Board at its 49th meeting held on 11th May 2017 had re-constituted the Corporate Social Responsibility Committee with following Directors as its members. The constitution consists of at least one Independent Director as member as required under Section 135 of the Companies Act, 2013. The details of the Terms of reference are provided in the Corporate Governance Report.

Name of Director DesignationShri Srinivas S Kamath Chairman and Independent DirectorShri Paritosh Kumar Gupta MemberShri A.K. Sahoo Member

Nomination and Remuneration CommitteeConsequent to the resignation of Shri Santosh Nautiyal as Independent Director and Shri Pradeep Puri as Director, the Board at its 49th meeting held on 11th May 2017 and 52nd Board meeting held on 05th March 2018 had re-constituted the Nomination and Remuneration Committee with following Directors as its members. The constitution consists of half of Members as Independent Directors as required under Section 178 of the Companies Act, 2013. The details of the Terms of reference are provided in the Corporate Governance Report.

Name of Director DesignationShri Srinivas S Kamath Chairman and Independent DirectorShri ISN Prasad Member and Independent DirectorShri H Kumar MemberShri Saibal Kumar De Member


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Internal Complaints Committee (ICC):

The Company in compliance of instruction of Department of Woman and Child development read with the guidelines issued by the Honourable Supreme Court, the company has constituted an Internal Complaints Committee to enquire into the complaints on sexual harassment of women at work place under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. As the Term of few members was completed, the ICC was re-Constituted during the year. The following are the members of the present ICC, Mrs Ashwini Hegde (Presiding officer), Mrs Kavya Akshay, Mrs Veena Shetty, Mr. Sudarshan Nayak and Mr. V. Phani Bhushan. During the financial year ended 31st March, 2018, the Company has not received any complaints pertaining to Sexual Harassment.

Vigil Mechanism:

The Company has adopted in its Board Meeting held on 28th March, 2015 a Vigil mechanism and Whistle blower policy (part of HR policy) which would be administered by the Audit Committee under which an employee who observes any unethical or improper practices or alleged wrongful conduct, shall make a disclosure to the Company Secretary in writing through letter or e-mail as soon as possible but not later than 30 consecutive calendar days after becoming aware of the same. The Company Secretary shall prepare a written summary of the employee’s disclosure and provide a copy to the employee and the Chairman, Audit Committee. Under exceptional circumstances employees may also directly report to the Chairman of the Audit Committee. Detailed policy on vigil mechanism is available on the Company’s website viz., www.mangaloresez.com

Particulars of Loans given, Investments made, Guarantees given and securities provided

During the year, the Company has not made any investment and no loans or guarantees or securities were provided to other business entities.

Fixed Deposit

The Company did not invite or accept any deposits from the public during the year within the meaning of Section 73 of the Companies Act, 2013. There are no unpaid or unclaimed deposits with the Company.

Particulars of Conservation of Energy, Technology Absorption etc.

Information on conservation of Energy, Technology absorption, Foreign Exchange earnings and outgo required to be disclosed under Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are provided hereunder:

(A) Conservation of Energy:

i) the steps taken or impact on conservation of energy Energy conservation continues to receive priority attention

at all levels. All efforts are made to conserve and optimise use of energy with continuous monitoring, improvement in maintenance and distribution systems and through improved operational techniques.

ii) the steps taken by the company for utilising alternate sources of energy

iii) the capital investment on energy conservation equipments;

(B) Technology absorption:

(i) the efforts made towards technology absorption

Updation of Technology is a Continuous process, absorption implemented and adapted by the Company for innovation. Efforts are continuously made to developing infrastructure and rendering allied services to its clients.


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(ii) the benefits derived like product improvement, cost reduction, product development or import substitution

The Company has been successful in conservation of river water by constructing Sewage Treatment Plants for treating the secondary sewage water with the help of the State of the Art Technology and making it fit for Industrial use.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)

Not applicable since 5 years period is over.

(a) the details of technology imported

(b) the year of import;

(c) whether the technology been fully absorbed

(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof

(iv) the expenditure incurred on Research and Development.

Nil

Foreign Exchange Earnings and Outgo 2017-18 2016-17Foreign Exchange Earnings Nil NilForeign Exchange Outgo Nil Rs 2,43,880

Extract of Annual Return

The extract of the annual return in Form MGT-9 in terms of Section 92(3) of the Companies Act, 2013 for the financial year under review has been provided as Annexure-V which forms part of the Directors’ Report.

Particulars of Employees

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules shall be made available to any shareholder on a specific request made by him in writing before or after the date of such Annual General Meeting.

Material changes and commitments, if any, affecting the financial position of the company

There are no material changes and commitments affecting the financial position of the company which occurred between the end of the financial year to which the financial statements relate and the date of the report.

Significant and Material Orders passed by the Regulators or Courts

No significant and material orders were passed by the Regulators / Courts that would impact the going concern status of the Company and its future operations.

Environment Protection Measures

• The Company has taken up regular environmental monitoring to check the quality of water and air to maintain the environmental standards. It has installed an online ambient air quality monitoring station as mandated by MoEF & Pollution Control Board. The online monitored data is continuously uploaded to Central Pollution Control Board website.


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Awards and Recognitions:

During the year, the Company has been awarded

a. “India’s Most Trusted Company 2017” under the category of “India’s Most Trusted SEZ & Business Destination” by International Brand Consulting Corporation, USA. The award was presented to the company on 24th Sept 2017 at The Leela Hotel in Mumbai.

b. National Awards for Excellence in water - 2017 under the category “Best Environmental Sustainability Initiative Award” for Recycling City Sewage by setting up Tertiary Treatment Plant under Joint Venture with Mangalore City Corporation by World CSR day, a for purpose organisation. The award was presented to the company on 20th September, 2017 at Vivanta by Taj - Yeshwantpur, Bangalore.

c. National Awards for Excellence in water 2017 under the category Award for Industries in Water Sector for the Mega water Infrastructure developed by the company in the Zone by The World CSR Day. The award was presented to the company on 20th September, 2017 at Vivanta by Taj - Yeshwantpur, Bangalore.

Acknowledgment

Your Directors wish to express a deep sense of gratitude and acknowledge the co-operation, assistance and support extended by the Central and State Government, Government departments & agencies, Banks and local authorities for their continued guidance and support. The Directors also wish to place on record their sincere appreciation for the total commitment, dedication and hard work put in by the employees at all levels for the development of the Company.

The Directors place on record their appreciation for the continued co-operation and confidence reposed by all stakeholders viz Oil and Natural Gas Corporation Ltd (ONGC), Infrastructure Leasing and Financial Services Ltd (IL&FS), Karnataka Industrial Areas Development Board (KIADB), Kanara Chamber of Commerce and Industry (KCCI) and ONGC Mangalore Petrochemical Ltd (OMPL).

On Behalf of the Board For Mangalore SEZ Limited

Place: New Delhi Paritosh Kumar Gupta Srinivas S Kamath Dated: 05th September, 2018 Managing Director Director DIN: 01054182 DIN: 1079043


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To,

The Members MANGALORE SEZ LIMITED 3rd Floor, Mangalore Urban Development Authority (MUDA) Building, Urwa Stores, Ashok Nagar Mangalore, Karnataka - 575 006

We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by MANGALORE SEZ LIMITED (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.

Based on our verification of MANGALORE SEZ LIMITED books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, we hereby report that in our opinion, the Company has, during the audit period ended on 31st March 2018 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

1. I have examined the books, papers, minute books, forms and returns filed and other records maintained by MANGALORE SEZ LIMITED for the financial year on 31st March 2018 according to the provisions of:

I. The Companies Act, 2013 (the Act) and the Rules made there under;

II. The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and rules made thereunder do not apply to the company as it is Unlisted Public company.

III. The Depositories Act, 1996 and the Regulations and Bye-laws do not apply to the company as it is Unlisted Public company.

IV. Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under.

V. The Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) is not applicable to company as it is not a listed company.

a. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

ANNEXURE I TO DIRECTORS REPORT

FORM NO. MR - 3

SECRETARIAL AUDIT REPORT

(FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2018)[Pursuant to Section 204(1) of the Companies Act, 2013 and Rule No.9 of the Companies

(Appointment and Remuneration of Managerial Personnel) Rules, 2014]


32

b. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;

c. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

d. The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

e. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and

f. The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;

I have also examined compliance with the applicable clauses of the following:

i) Secretarial Standards issued by The Institute of Company Secretaries of India. During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines & Standards mentioned above.

2. I further report that

The Company has, in my opinion, complied with the provisions of the Companies Act, 1956 and the Rules made under that Act and the provisions of Companies Act, 2013 as notified by Ministry of Corporate Affairs and the Memorandum and Articles of Association of the Company, with regard to:

a) Maintenance of various statutory registers and documents and making necessary entries therein;

b) Closure of the Register of Members.

c) Forms, returns, documents and resolutions required to be filed with the Registrar of Companies and the Central Government;

d) Service of documents by the Company on its Members, Auditors and the Registrar of Companies;

e) Notice of Board meetings and Committee meetings of Directors;

f) The meetings of Directors and Committees of Directors including passing of resolutions by circulation;

g) The Annual General Meeting held on 19.08.2017;

h) Minutes of proceedings of General Meetings and of the Board and its Committee meetings;

i) Approvals of the Members, the Board of Directors, the Committees of Directors and the government Authorities, wherever required;

j) Constitution of the Board of Directors / Committee(s) of Directors, appointment, retirement and reappointment of Directors including the Managing Director and Whole-time Directors;

k) Payment of remuneration to Directors including the Managing Director and Whole-time Directors;

l) Appointment and remuneration of Auditors and Internal Auditors;


33


m) Transfers and transmissions of the Company’s shares and issue and dispatch of duplicate certificates of shares if any;

n) Declaration and payment of dividends if any;

o) Transfer of certain amounts as required under the Act to the Investor Education and Protection Fund and uploading of details of unpaid and unclaimed dividends on the websites of the Company and the Ministry of Corporate Affairs is not applicable;

p) Borrowings and registration, modification and satisfaction of charges wherever applicable;

q) Investment of the Company’s funds including investments and loans to others if any;

r) form of balance sheet as prescribed under Part I, form of statement of profit and loss as prescribed under Part II and General Instructions for preparation of the same as prescribed in Schedule III to the Act;

s) Directors’ report;

t) Contracts, common seal, registered office and publication of name of the Company; and

u) Generally, all other applicable provisions of the Act and the Rules made under the Act.

3. I further report that:

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Majority decision is carried through while the dissenting members’ views if any are captured and recorded as part of the minutes. The Company has obtained all necessary approvals under the various provisions of the Act; and

There was no prosecution initiated and no fines or penalties were imposed during the year under review under the Act, SEBI Act, SCRA, Depositories and Guidelines framed under these Acts against / on the Company, its Directors and Officers.

The Directors have complied with the disclosure requirements in respect of their eligibility of appointment, their being independent and compliance with the Code of Business Conduct & Ethics for Directors and Management Personnel;

4. The provisions of the Securities Contracts (Regulation) Act, 1956 and the Rules made under that Act, with regard to maintenance of minimum public shareholding is not applicable to this company.


34

5. I further report that:

Based on the information received and records maintained, there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

Place: Mangaluru CS Narasimha Pai P. Date: 09.08.2018 FCS No.9543, CP No: 11629


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Company's philosophy on Corporate Governance

The Company is committed to maintain the highest standards of Corporate Governance in its dealings with its various stakeholders. It is an integral part of the Company's core values which include transparency, integrity, honesty and accountability. The Company believes in practicing good Corporate Governance and endeavors to improve on these aspects on an ongoing basis.

Board of Directors

As on March 31, 2018, the Company’s Board of Directors comprised of Eight Directors consisting of one Executive Director and Five Non-Executive Directors and Two Non-Executive and Independent Directors. The Details of the Directors are as under :

Name of Director Designation Category of Directorship

Shri Shashi Shanker Chairman Non-Executive Director

Shri Paritosh Kumar Gupta Managing Director Executive Director

Shri ISN Prasad Independent Director Non-Executive Director

Shri Srinivas S Kamath Independent Director Non-Executive Director

Shri H. Kumar Nominee Director from ONGC Non-Executive Director

Shri A.K. Sahoo Nominee Director from ONGC Non-Executive Director

Shri Saibal Kumar De Additional Director (Nominee from IL&FS) Non-Executive Director

Smt. Cholpady Vathika Kamath Additional Director (Nominee from KCCI) Non-Executive Director

Changes during the financial year 2017-18:

Name of the Director Date of Resignation Remarks

Shri Santosh Nautiyal 29/04/2017 Resigned as Independent Director of the Company.

Shri Pankaj Kumar Pandey 19/08/2017 He has been transferred as Secretary to Food & Civil Supplies Department vide Government of Karnataka (GoK) Notification No. DPAR 382 SAS 2017 dated July 27, 2017.

Shri Dinesh Kumar Sarraf 01/10/2017 Consequent upon superannuation from the services of ONGC as Chairman and Managing Director, Shri D.K. Sarraf has resigned as the Chairman / Director on the Board of Company.

Shri Jeevan Saldanha 04/11/2017 Consequent upon completion of his tenure as President of KCCI, Shri Jeevan Saldanha resigned as Director of the Company.

Shri Pradeep Puri 23/11/2017 Resigned as Director of the Company.

ANNEXURE II TO DIRECTORS REPORT

CORPORATE GOVERNANCE REPORT FOR THE YEAR 2017-18


36

Name of the Director Date of Appointment Remarks

Shri Shashi Shanker 16/10/2017 Nominee of ONGC

Shri Saibal Kumar De 22/12/2017 Nominee of IL&FS

Smt. Cholpady Vathika Kamath 14/11/2017 Nominee of KCCI

Shri Paritosh Kumar Gupta 11/05/2017 Re-appointed as Managing Director

Changes in the Board of Directors after 31st March 2018.

1. Shri H. Kumar has resigned as Director of the Company effective from 1st June, 2018, consequent upon

superannuation from the services of Mangalore Refinery and Petrochemicals Ltd (MRPL) as Managing Director.

2. Shri Venkatesh Madhava Rao, Managing Director, MRPL was appointed as an Additional Director (Nominee of

ONGC) of the Company effective from 25th June 2018, pursuant to the nomination made by Oil and Natural Gas

Corporation Limited (ONGC) vide their letter Ref. No. ONGC/CS-MSEZ/2018 dated 14th June 2018.

The Board places on record its appreciation for the valuable services rendered by the outgoing Directors during their

respective tenure.

Directors Appointments / Re-appointments

In terms of Section 152 of the Companies Act, 2013, Shri A.K. Sahoo (DIN: 07355933) Director will retire by rotation

at the Annual General Meeting and being eligible, offer himself for re-appointment. The Board of Directors of the

Company recommend his re-appointment.

In terms of Section 160 of the Companies Act, 2013, Shri Shashi Shanker (DIN: 06447938) who was appointed as

additional director by the Board on 16th October 2017 is proposed to be appointed as Director at the ensuing Annual

General Meeting. The Board of Directors of the Company recommends his appointment.

In terms of Section 160 of the Companies Act, 2013, Smt. Cholpady Vathika Kamath (DIN: 05351602) who was

appointed as additional director by the Board on 14th November 2017 is proposed to be appointed as Director at the

ensuring Annual General Meeting. The Board of Directors of the Company recommends her appointment.

In terms of Section 160 of the Companies Act, 2013, Shri Saibal Kumar De (DIN: 00498241) who was appointed

as additional director by the Board on 22nd December 2017 is proposed to be appointed as Director at the ensuing

Annual General Meeting. The Board of Directors of the Company recommends his appointment.

In terms of Section 160 of the Companies Act, 2013, Shri Venkatesh Madhava Rao (DIN: 07025342) who was

appointed as additional director by the Board on 25th June 2018 is proposed to be appointed as Director at the

ensuing Annual General Meeting. The Board of Directors of the Company recommends his appointment.

The Board of Directors at the 53rd meeting held on May 14, 2018 have re-appointed Shri Paritosh Kumar Gupta, as

the Managing Director of the company for further period of 1 year with effect from 19th May, 2018 at a remuneration

of Rs.30 lakhs p.a., subject to the approval of the shareholders in the General Meeting. The Board of Directors of the

Company recommends his re-appointment.

A Statement showing the particulars of Directors as per the corporate governance regulations is Annexed to the

Notice.


37


Board Meetings held during the financial year 2017-18During the financial year under review, the Board of Directors met four times as under:

Number of the Meeting Date of Meeting Place of Meeting

49th 11th May, 2017 New Delhi

50th 21st July, 2017 New Delhi

51st 14th November, 2017 New Delhi

52nd 05th March, 2018 New Delhi

Attendance of Directors as on March 31, 2018 at the Board meetings held during the financial year 2017-18 and attendance at the 11th AGM and directorships / Committee positions held in other companies were as under:

Name of DirectorNo. of Board

meetings held during the year

No. of Board Meetings attended

Attendance at the 11th

AGM

Directorships in other

companies*

No. of outside committee #

Member Chairman

Shri Shashi Shanker (w.e.f 16/10/2017)

4 2 NA 7 - -

Shri Paritosh Kumar Gupta 4 4 Present 8 2 -

Shri I.S.N Prasad 4 3 Absent 9 - -

Shri Srinivas S Kamath 4 4 Present - - -

Shri H Kumar** 4 4 Present 4 - -

Shri A.K. Sahoo 4 3 Present 2 2 -

Shri Saibal Kumar De (w.e.f 22/12/2017)

4 1 NA 10 1 -

Smt C. Vathika Kamath (w.e.f 14/11/2017)

4 1 NA 1 - -

# Chairmanship / Membership of the Audit Committee and Stakeholders’ Relationship Committee of Public Limited Companies,*excludes directorships in foreign companies** Resigned as Director w.e.f 01/06/2018.

Details of attendance of Directors (resigned during the year) at the Board meetings held during the financial year 2017-18 and attendance at the 11th AGM and directorships / Committee positions held in other companies

Name of Director No. of Board meetings

held during the year

No. of Board

Meetings attended

Attendance at the

11th AGM

Directorships in other

companies*

No. of outside committee #

Member ChairmanShri Dinesh Kumar Sarraf 4 2 Present 7 1 -Shri Jeevan Saldanha 4 2 Present 2 - -Shri Santosh Nautiyal 4 0 NA 2 - -Shri Pradeep Puri 4 1 Absent 9 4 1Pankaj Kumar Pandey 4 0 Absent 6 - -

# Chairmanship / Membership of the Audit Committee and Stakeholders’ Relationship Committee of Public Limited Companies,*excludes directorships in foreign companies


38

Independent Directors

In order to comply with the provisions of Companies Act 2013, the company has appointed Independent Directors.

Considering the requirement of skill sets on the Board, eminent people having an independent standing in their

respective field / profession, and who can effectively contribute to the Company’s business and policy decisions

are considered by the Nomination and Remuneration Committee, for appointment, as Independent Directors on

the Board. The Committee, inter alia, considers qualification, positive attributes, area of expertise and number of

Directorships and Memberships held in various committees of other companies by such persons while selecting such

Directors and determining Directors’ independence. The Board considers the Committee’s recommendation, and

takes appropriate decision subject to the approval of Shareholders in the General Meeting.

Following are the Independent Directors as at 31st March, 2018.

Name Date of Appointment Tenure

Shri I.S.N Prasad 28th March 2015 5 Years

Shri Srinivas S. Kamath 28th March 2015 5 Years

Disclosure of Relationships between directors Inter-se:

Inter-se relationships between Directors and Key Managerial Personnel of the Company: None.

Number of Shares held by Non-Executive Directors:

The Non-Executive Directors do not hold any shares in the Company.

Audit Committee

The Company has a duly Constituted Audit Committee in accordance with the provisions of the Companies Act, 2013. The broad terms of reference, role and scope were drawn as per the provisions of the Act. The terms of reference of the Audit Committee as approved by the Board is reproduced below:

• To discuss with the auditors periodically about the internal control systems, the scope of audit including the observation of the auditors.

• To review the half-yearly and annual financial statements before submission to the Board for its approval,

• To ensure compliance of internal control systems

• To investigate into any matter in relation to the items referred to it by the Board.

• To make any recommendations on any matter relating to financial management, including the Audit Report.

Four Meetings of the Audit Committee were held during the financial year 2017-18;

Number of the meeting Date of Meeting Place of meeting

32nd 11th May, 2017 New Delhi

33rd 21st July, 2017 New Delhi

34th 10th November, 2017 Mangalore

35th 28th February, 2018 Bangalore


39


The composition of the Committee during the year under review and the details of meetings attended by the Directors during the financial year are given below:

Name of Director Designation No. of meetings held during the year

No. of meetings attended

Shri Srinivas S Kamath Chairman & Independent Director 4 4

Shri ISN Prasad Member & Independent Director 4 4

Shri A.K. Sahoo Member 4 1

Shri Paritosh Kumar Gupta* Member 4 1

Shri Santosh Nautiyal** Member & Independent Director 4 -

*ceased to be a members w.e.f 11th May 2017.

**Resigned as Director w.e.f 29th April 2017.

The Statutory Auditors and Internal Auditors of the Company were invited to attend the Audit Committee meetings where ever required.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee was constituted on 29th August 2014 pursuant to Section 135 of the Companies Act, 2013. The CSR Committee formulates the CSR Policy, monitors the CSR activities & CSR spending of the company as per the guidelines of Companies Act, 2013.

Two Meetings of the Corporate Social Responsibility Committee was held during the financial year 2017-18;


5th 21st July 2018 New Delhi

6th 31st March 2018 Mangalore


Name of Director DesignationNo. of meetings held

during the YearNo. of meetings

attended

Shri Srinivas S Kamath Chairman & Independent Director 2 2

Shri Paritosh Kumar Gupta Member 2 2

Shri A.K. Sahoo Member 2 1

Shri Santosh Nautiyal* Chairman and Independent Director 2 -

*Resigned as Director w.e.f 29th April, 2017.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee was constituted by the Board on 29th August, 2014 pursuant to Section 178 of the Companies Act, 2013.


40

The Nomination and Remuneration Committee shall:

a. Formulate the criteria for determining qualifications, positive attributes and independence of a director.

b. Identify persons who are qualified to become Director and persons who may be appointed in Key Managerial and Senior Management positions in accordance with the criteria laid down in this policy.

c. Recommend to the Board, appointment and removal of Director, KMP and Senior Management Personnel (at Board level).

One meeting of the Nomination and Remuneration Committee was held during the financial year 2017-18;


6th 11th May 2017 New Delhi


Name of Director Designation No. of meetings held during the tenure

No. of meetings attended

Shri Srinivas S Kamath (w.e.f 11/05/2017)

Chairman & Independent Director 1 -

Shri ISN Prasad Member & Independent Director 1 1

Shri H Kumar Member 1 1

Shri Saibal Kumar De (w.e.f 05/03/2018)

Member 1 -

Shri Pradeep Puri** Member 1 1

Shri Santosh Nautiyal* Chairman & Independent Director 1 -

*Resigned as Director w.e.f 29th April, 2017.

** Resigned as Director w.e.f 23rd November 2017.

Committee of Directors (COD)

The Committee of Directors is constituted for following powers based on the value of contracts and proposals:

1. To approve the work contracts: Award of contracts on open tender basis from Rs.10 Crore to Rs.200 Crore, limited tender basis from Rs.7.5 Crore to Rs.150 Crore and single tender basis from Rs.2.50 to Rs.50 Crore.

2. To approve appointment of consultants ranging form Rs.50 Lakhs to Rs.1 Crore.

3. To approve variation proposals where value of variation is between Rs.5 Crore to Rs.50 Crore subject to max ceiling of 10% of the contract value.

Committee of Directors reviews all proposals of award of works which requires approval of Board of Directors and furnishes its recommendation to the Board. Committee of Directors have powers up to 5% of the order value mentioned against in S.No.1 above to waive compensation for loss and/or liquidated damage / price reduction already claimed / levied due to failure of contractors / suppliers.


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COD Meetings held during the financial year 2017-18 - Nil

The composition of the Committee during the year under review and the details of meeting attended by the Directors during the financial year are given as under:

Name of Director DesignationNo. of meetings held

during the periodNo. of meetings

attended

Shri Paritosh Kumar Gupta Member Nil - NA -

Shri Pradeep Puri* Member Nil - NA -

Shri A.K. Sahoo Member Nil - NA -

Shri Saibal Kumar De (w.e.f 05/03/2018) Member Nil - NA -

* Resigned as Director w.e.f 23rd November 2017.

HRM Committee

The HRM Committee was reconstituted by the Board on 11th May, 2017. HRM Committee has not met during the financial year 2017-18;

The composition of the Committee during the year ended 31st March 2018 is as under:


Shri Srinivas S Kamath Member

Shri ISN Prasad Member

Shri Paritosh Kumar Gupta Member

Shri A.K. Sahoo Member

Business Committee

The Business Committee was reconstituted by the Board on 11th May, 2017. No Meetings of the Business Committee were held during the financial year 2017-18;

The composition of the Committee during the year ended 31st March 2018 is as under:


Shri Srinivas S Kamath Member

Shri Paritosh Kumar Gupta Member

Shri A.K. Sahoo Member

Remuneration to Directors

The Company pays sitting fees to Non-Executive Independent Directors for attending the Board and Audit Committee meetings. The Details of sitting fees paid during the financial year 2017-18 are provided hereunder

Name of Director Amount in Rs

Shri ISN Prasad 1,75,000

Shri S.S. Kamath 2,00,000

Shri Santosh Nautiyal -


42

The company do not pay any sitting fees to the Non-Executive Directors and Executive Director.

The remuneration paid to Shri Paritosh Kumar Gupta, Managing Director towards salary and allowances, from April 01, 2017 to March 31, 2018 was Rs.33,42,473/-.

Other Disclosures as required under Schedule V part II of Section II:

S.No Particulars Details

I All elements of remuneration package such as salary, benefits, bonuses, stock options, pension etc., of all the directors;

The Managing Director is paid the fixed Remuneration. Sitting fees is paid to Independent Directors for attending the Board and Audit Committee meetings.

ii Details of fixed component and performance linked incentives along with the performance criteria;

NA

iii Service contracts, notice period, severance fees; and Nil

iv Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

NA

Annual General Meetings (AGM)

The details of the last three Annual General Meetings of the Company are as under:

Financial Year Ended

Date of AGM

Time Venue Special Resolution passed

31st March 2015

24th September

2015

12.30 Hrs Hotel Le-Meridien, No.28, Sankey Road,

Bangalore - 560 052

Appointment of Shri Paritosh Kumar Gupta as Managing Director

31st March 2016

29th September

2016

12.45 Hrs Hotel Le-Meridien, No.28, Sankey Road,

Bangalore - 560 052

a. Appointment of Shri Paritosh Kumar Gupta as Managing Director

b. Resolution under 180 (1) (c)c. Resolution under 180 (1) (a)d. Transfer of Assets and Liabilities

of power distribution business of MSEZL to MSEZ Power Ltd.

31st March 2017

19th August 2017

9.30 Hrs 3rd Floor, MUDA Building, Urwa Stores, Ashok Nagar,

Mangalore - 575 006

a. Appointment of Shri Paritosh Kumar Gupta as Managing Director

Extra-ordinary General Meeting

During the year under review, the company has not conducted any Extra-Ordinary General Meeting.

Code of Conduct

The Company is committed to conducting its business in conformity with ethical standards and applicable laws and regulations. This commitment stands evidenced by the Code of Conduct adopted by the Board of Directors at their 32nd meeting held on 26th March, 2013 which is applicable to each member of the Board of Directors and Senior Management of the Company. The Board Members and Senior Management have affirmed the compliance to the Code of Conduct of the company for the year ended March 31, 2018.


43


CEO and CFO Certification

Certificate on the financial statement and internal controls relating to financial reporting from Managing Director and Chief Financial Officer of the Company for the year ended 31st March, 2018 was submitted to the Board at its meeting held on 14th May, 2018.

General Shareholder Information

The Company is registered in the State of Karnataka, India. The Corporate Identification Number (CIN) allotted to the Company by the Ministry of Corporate Affairs (MCA) is U45209KA2006PLC038590.

The Annual General Meeting is scheduled to be held on September 28, 2018.

Financial Calendar: April to March.

Book Closure: None.

Registrars / Transfer Agents: Company's in-house department carries out the related jobs.

Address for correspondence: 3rd Floor, MUDA Building, Ashoknagar, Urwa Stores, Mangalore - 575 006, Phone: 0824-2452748 / 2452750 Fax: 0824-2452749

Annual Report: Annual Report containing inter-alia, Audited Accounts, Board’s Report, Corporate Governance Report, Auditor’s Report including information for the shareholders and other important information is circulated to the members and others entitled thereto.

Designated Exclusive email-id: The Company has designated the following email-id exclusively for investor services: [email protected] / [email protected]

Special Economic Zone Location: Mangalore SEZ Ltd, Bajpe, Permude Village, Mangalore – 574 509, Dakshina Kannada (Dist), Karnataka.

Shareholding Pattern as on 31st March 2018:

Sl. No.

Name of ShareholderNo. of Equity Shares of Rs.10/- each Held

% of Shareholding

1 Infrastructure Leasing and Financial Services Ltd. (IL&FS) 25,000,000 50.00

2 Oil and Natural Gas Corporation Ltd (ONGC) 13,000,000 26.00

3 Karnataka Industrial Area Development Board (KIADB) 11,500,000 23.00

4 ONGC Mangalore Petrochemicals Ltd (OMPL) 480,000 0.96

5 Kanara Chamber of Commerce & Industries (KCCI) 20,000 0.04

6 V. Suryanarayana 100 0

7 Rishi Bhardwaj 500 0

8 Diwakar Sinha 100 0

9 Paritosh Kumar Gupta 500 0

TOTAL 50,001,200 100.00

Disclosures:

Related Party Transactions: There was no materially significant related party transaction with its promoters, the Directors or the management or relative of the Directors that may have potential conflict with the interests of the Company.


44

Disclosure of Accounting Treatment: In preparation of the Financial Statements, the company has followed the Accounting Standards issued by the Institute of Chartered Accountant of India (ICAI), to the extent applicable.

Compliances: The Company has complied with provisions of law and regulations as applicable to the Company.

Transfer to Investor Education and Protection Fund (IEPF): The Company has not accepted any deposits from the public and also the Company has not declared any dividend since its incorporation. Therefore, transfer by the Company to the Investor Education and Protection Fund established by the Central Government pursuant to Section 124 of the Companies Act, 2013 do not arise.




45


Form for disclosure of particulars of contracts / arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm’s length transactions under third proviso is given below

1. Details of contracts or arrangements or transactions not at arm’s length basis:

Sl.No Particulars Details

a) Name (s) of the related party & nature of relationship

Infrastructure Leasing and Financial Services Limited (IL&FS) – Associate.

b) Nature of contracts / arrangements / transaction

Payment of Administrative fees of Rs.20 Lakhs plus taxes for issue of Sponsor Support undertaking to the Lenders on behalf of the Company.

c) Duration of the contracts /arrangements / transaction

One-time payment of administrative fees.

d) Salient terms of the contracts or arrangements or transaction including the value, if any

Rs.20 Lakhs plus applicable GST.

e) Justification for entering into such contracts or arrangements or transactions

The Company has refinanced the then existing Term Loan of Rs.585 Cr with State Bank of India and also tied up with Corporation Bank for the balance Term Loan of Rs.121 Cr. The Terms of the Sanction of the SBI and Corporation Bank seeks for furnishing the Sponsor undertaking from the sponsors viz Oil and Natural Gas Corporation (ONGC), Infrastructure Leasing & Financial Services Limited (IL&FS) and Karnataka Industrial Areas Development Board (KIADB) for securing the Term Loan facilities sanctioned to the Company. The Sponsors have undertaken for the following conditions till the Final Settlement Date: (a) they shall contribute / infuse / arrange for such funds as part of

the Equity Contribution to fund Cost Overrun (if any) and maintain the Debt to Equity Contribution Ratio not more than Agreed Debt Equity Contribution Ratio at all times

(b) In the event the Equity Contribution towards the Project is brought in any form other than equity shares, then the servicing / repayment/ redemption of such Equity Contribution (other than equity shares) shall be subordinated to the servicing of the Facility.

(c) they shall arrange funds for financing any shortfall in projected internal accruals in a manner acceptable to the Lenders

(d) The Sponsors shall jointly hold at least 26% (twenty six percent) of the shareholding.

f) Date of approval by the Board 05th March 2018

g) Amount paid as advances, if any Nil

h) Date on which the special resolution was passed in General meeting as required under first proviso to section 188

Not Applicable

ANNEXURE III TO DIRECTORS REPORT

FORM NO AOC-2(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2)

of the Companies (Accounts) Rules, 2014)


46

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Nam

e (s

) o

f th

e re

late

d

par

ty

ON

GC

IL&

FSK

IAD

BO

MPL

MR

PLIID

C L

TD

aN

atur

e of

Rel

atio

nshi

pA

ssoc

iate

Ass

ocia

teA

ssoc

iate

ON

GC

-Ult

imat

e ho

ldin

g co

mpa

nySu

bsid

iary

of

ON

GC

Subs

idia

ry o

f IL

&FS

bN

atur

e of

con

trac

ts/

arra

ngem

ents

/ tr

ansa

ctio

n

As

men

tion

ed

in S

l. N

o. (

d)

belo

w

As

men

tion

ed

in S

l. N

o. (

d)

belo

w

As

men

tion

ed in

Sl.

No.

(d)

bel

owA

s m

enti

oned

in S

l. N

o. (

d) b

elow

As

men

tion

ed in

Sl.

No.

(d)

bel

owA

s m

enti

oned

in

Sl.

No.

(d)

be

low

cD

urat

ion

of t

he

cont

ract

s / a

rran

gem

ents

/ t

rans

acti

on

01.0

4.20

17to

31.0

3.20

18

01.0

4.20

17to

31.0

3.20

18

01.0

4.20

17

to

31.0

3.20

18

01.0

4.20

17to

31

.03.

2018

01.0

4.20

17to

31

.03.

2018

01.0

4.20

17

to

31.0

3.20

18

dSa

lient

ter

ms

of

the

cont

ract

s or

ar

rang

emen

ts o

r tr

ansa

ctio

n in

clud

ing

the

valu

e, if

any

Nil

a) S

ervi

ce

rece

ived

–D

eput

atio

n of

M

D

b) S

ervi

ce

rece

ived

-R

enti

ng

a) A

cqui

siti

on o

f La

nd/R

&R

colo

ny.

b) S

ervi

ces

rece

ived

–

Ann

ual l

ease

ren

t

c) S

ervi

ces

rece

ived

-RO

W c

harg

esd)

Tow

ards

ac

quis

itio

n of

land

a) S

uppl

y of

ser

vice

s-C

orri

dor

ROW

b) S

uppl

y of

ser

vice

s-A

nnua

l lea

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enta

lc)

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e of

pro

duct

sd)

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ply

of s

ervi

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e) In

tere

st p

ayab

le

on s

ecur

ity

depo

sit

(Pow

er)

a) S

uppl

y of

se

rvic

es-

‘By

pass

ro

ad’ c

harg

esb)

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e of

pro

duct

sc)

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ply

of s

ervi

ces

d) S

uppl

y of

se

rvic

es -

Cor

rido

r RO

W

a) S

ervi

ce

rece

ived

- D

eput

atio

n of

Adv

isor

b

) Su

pply

of

serv

ices

-Ren

t

eJu

stifi

cati

on f

or e

nter

ing

into

suc

h co

ntra

cts

or a

rran

gem

ents

or

tran

sact

ions

Ord

inar

y C

ours

e of

Bu

sine

ss

Ord

inar

y co

urse

of

busi

ness

Ord

inar

y

cour

se o

f

busi

ness

Ord

inar

y

cour

se o

f

busi

ness

Ord

inar

y

cour

se o

f

busi

ness

Ord

inar

y co

urse

of

busi

ness

fD

ate

of a

ppro

val b

y th

e Bo

ard

Not

ap

plic

able

a)11

/05/

17b)

Not

ap

plic

able

Not

ap

plic

able

Not

ap

plic

able

Not

ap

plic

able

Not

ap

plic

able

gA

mou

nt in

curr

ed d

urin

g th

e ye

ar (

Rs in

lakh

s)N

ila)

33.

42b)

0.0

2a)

Nil

b) 5

.17

c) N

ild)

176

.48

a) N

ilb)

233

.96

c) 2

783.

82d)

100

4.55

e) 9

.70

a) N

il b)

254

1.55

c) 2

890.

49d)

Nil

a) N

ilb)

1.3

6


47

Mangalore SEZ LimitedS.

No

Nam

e (s

) o

f th

e re

late

d p

arty

IL

&FS

En

erg

y D

evel

op

men

t C

om

pan

y Lt

d

Man

gal

ore

ST

P Lt

dM

SEZ

Pow

er

Ltd

Key

Man

ager

ial

Pers

on

nel

Key

Man

ager

ial

Pers

on

nel

Key

Man

ager

ial

Pers

on

nel

aN

atur

e of

Rel

atio

nshi

pSu

bsid

iary

of

IL&

FSSu

bsid

iary

C

ompa

nySu

bsid

iary

co

mpa

nyC

hief

Ope

rati

ng

Off

erC

hief

Fin

anci

al

offi

cer

Com

pany

Se

cret

ary

bN

atur

e of

con

trac

ts/

arra

ngem

ents

/ tr

ansa

ctio

nA

s m

enti

oned

in

Sl.N

o. (

d)

belo

w

As

men

tion

ed

in S

l.No.

(d)

be

low

As

men

tion

ed

in S

l.No.

(d)

be

low

Rem

uner

atio

nRe

mun

erat

ion

Rem

uner

atio

n

cD

urat

ion

of t

he c

ontr

acts

/ ar

rang

emen

ts /

tran

sact

ion

01.0

4.20

17to

31.0

3.20

18

01.0

4.20

17to

31.0

3.20

18

01.0

4.20

17

to

31.0

3.20

18

01.0

4.20

17to

31

.03.

2018

01.0

4.20

17to

31

.03.

2018

01.0

4.20

17to

31

.03.

2018

dSa

lient

ter

ms

of t

he c

ontr

acts

or

arr

ange

men

ts o

r tr

ansa

ctio

n in

clud

ing

the

valu

e, if

any

Serv

ices

re

ceiv

ed -

C

onsu

ltan

cy

a) S

uppl

y of

go

ods

a) S

uppl

y of

se

rvic

esC

hief

Ope

rati

ng

Off

erC

hief

Fin

anci

al

Off

icer

Com

pany

Se

cret

ary

eJu

stifi

cati

on f

or e

nter

ing

into

suc

h co

ntra

cts

or

arra

ngem

ents

or

tran

sact

ions

Ord

inar

y C

ours

e of

Bu

sine

ss

Ord

inar

y co

urse

of

busi

ness

Ord

inar

y

cour

se o

f bu

sine

ss

Ord

inar

y

cour

se o

f bu

sine

ss

Ord

inar

y

cour

se o

f bu

sine

ss

Ord

inar

y

cour

se o

f bu

sine

ss

fD

ate

of a

ppro

val b

y th

e B

oard

Not

A

pplic

able

Not

ap

plic

able

Not

app

licab

le15

th O

ctob

er

2016

29th A

ugus

t 20

1412

th M

ay 2

016

gA

mou

nt in

curr

ed d

urin

g th

e ye

ar (`

In la

khs)

Nil

322

.76

0.26

57.2

561

.70

21.2

3

O

n Be

half

of

the

Boar

d

For

Man

galo

re S

EZ L

imit

ed

Plac

e: N

ew D

elhi

Pa

rito

sh K

um

ar G

up

ta

Srin

ivas

S K

amat

h

Dat

ed: 0

5th S

epte

mbe

r, 20

18

Man

agin

g D

irec

tor

Dir

ecto

r

DIN

: 010

5418

2 D

IN: 1

0790

43


48

1. A brief outline of the company’s CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy.

To actively contribute to the social and economic development of the communities in which we operate through our services, conduct and initiatives with environmental concern. In so doing build a better, sustainable way of life for the weaker sections of society.

Depending upon their core competency and business interest, Company shall undertake activities for economic and social development of communities and geographical areas, particularly in the vicinity of its operations.

These include: Promoting education, skill building for livelihood of people, health, cultural and social welfare etc, particularly targeting sections of society.

To generate through its CSR initiatives, a community goodwill for MSEZL and help re-inforce a positive and socially responsible image of the Company as a Corporate entity

The CSR Committee has allocated the budget for CSR activities for the FY 2017-18. The CSR Policy is available at companies Website viz www.mangaloresez.com under policies.

2. Composition of CSR Committee Shri S.S. Kamath – Chairman (w.e.f 11th May 2017)Shri Paritosh Kumar Gupta – MemberShri A.K. Sahoo – Member

3. Average net profit (PBT) of the Company for last three financial years

Rs.9.19 Cr

4. Prescribed CSR expenditure (two percent of the amount mentioned in item 3 above)

Rs.18.38 Lakhs

5. Details of CSR spent during the financial year: Rs.19.02 Lakhs (excludes CSR spend of previous years)

Total amount to be spent for the financial year Rs.18.38 Lakhs

Amount unspent, if any Nil

Manner in which the amount spent during the financial year

Details given below

6. In case the company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report.

Not Applicable

7. Implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company.

Yes

ANNEXURE IV TO DIRECTORS REPORT

Annual Report on Corporate Social Responsibility (CSR) activities for the financial year 2017-18


49

Mangalore SEZ LimitedC

SR E

xpen

dit

ure

incu

rred

du

rin

g t

he

Fin

anci

al Y

ear

2017

-18

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Sl.

No

CSR

pro

ject

or

acti

vity

id

enti

fied

Sect

or

in w

hic

h t

he

pro

ject

is c

ove

red

Pro

ject

s o

r p

rog

ram

s L

oca

l are

a o

r o

ther

s S

pec

ify

the

Stat

e an

d

dis

tric

t w

her

e p

roje

cts

or

pro

gra

m w

as u

nd

erta

ken

Am

ou

nt

ou

tlay

(b

ud

get

) p

roje

ct o

r p

rog

ram

s w

ise

Am

ou

nt

spen

t o

n t

he

pro

ject

s o

r p

rog

ram

sSu

b-h

ead

s1)

Dir

ect

exp

end

itu

re

on

pro

ject

or

pro

gra

ms

2) O

verh

ead

s

Cu

mu

lati

ve

exp

end

itu

re

up

to t

he

rep

ort

ing

p

erio

d

Am

ou

nt

spen

t: D

irec

t o

r th

rou

gh

im

ple

men

t-in

g a

gen

cy

1Ru

ral

Dev

elop

men

t pr

ojec

ts f

or

uplif

tmen

t of

liv

elih

ood

of

the

soci

ety

and

prom

otin

g ed

ucat

ion

and

othe

r al

lied

acti

viti

es.

Und

er c

laus

e (ii

) of

Sc

hedu

le V

II of

the

A

ct –

Pro

mot

ing

educ

atio

n, L

ivel

ihoo

d en

hanc

emen

t an

d Ru

ral D

evel

opm

ent

proj

ects

Dis

trib

utio

n of

tex

t an

d ac

adem

ic b

ooks

, Sch

ool

bags

, Com

pute

rs, D

ispl

ay

Boar

ds, L

ED li

ghts

and

rep

air

wor

ks t

o sc

hool

bui

ldin

gs

at v

ario

us v

illag

es m

ajor

ity

falli

ng u

nder

Loc

al a

rea

viz

Kodi

cal,

Bajp

e, J

okat

te,

Kati

palla

, Ban

twal

, Kol

ambe

, U

rwa

mar

ket,

Pan

aje,

U

ppin

anga

dy, D

aksh

ina

Kann

ada

(Dis

t), K

arna

taka

,

Rs.2

5,00

,000

(f

or 3

yea

rs)

Rs.1

1,44

,220

(Dir

ect

& n

o ov

erhe

ads)

Rs.1

1,44

,220

Dir

ect

2Pr

ovid

ing

Hea

lth

Car

e,

sani

tati

on a

nd

othe

r al

lied

acti

viti

es

Und

er c

laus

e (i)

of

Sche

dule

VII

of t

he

Act

– P

rom

otin

g H

ealt

h C

are

incl

udin

g pr

even

ting

H

ealt

h C

are,

M

akin

g av

aila

ble

safe

dri

nkin

g w

ater

, Era

dica

ting

H

unge

r,Pov

erty

and

M

alnu

trit

ion

Dis

trib

utio

n of

foo

d, R

ice

bags

, pro

vidi

ng w

ater

pu

rifie

rs a

nd a

dver

tisi

ng

for

anti

mal

aria

Cam

paig

n,

cond

ucti

ng d

enta

l cam

p an

d pr

ovid

ing

wat

er h

eate

r at

Sh

akth

i Nag

ar, M

anga

lore

, Ba

ntw

al, U

rwa

Mar

ket,

Jo

katt

e,Ko

teka

r, D

aksh

ina

Kann

ada

Dis

t, K

arna

taka

.

Rs.1

5,00

,000

(f

or 3

Yea

rs)

Rs.6

,39,

333

(Dir

ect

& n

o ov

erhe

ads)

Rs.6

,39,

333

Dir

ect


50

3Pr

otec

tion

of

Nat

iona

l H

erit

age,

art

s an

d C

ultu

re,

Prom

otio

n an

d de

velo

pmen

t of

art

s an

d H

andi

craf

ts

Cla

use

(v)

of

Sche

dule

VII

of t

he

Act

– P

rom

otin

g an

d Pr

otec

tion

of

Art

s,

Publ

ic li

brar

ies

and

Nat

iona

l Her

itag

e.

Prom

otin

g tr

adit

iona

l art

ca

lled

Yaks

haga

na, Y

oga

and

othe

r ar

ts a

t Ka

tipa

lla,

man

galo

re, D

aksh

ina

Kann

ada,

Kar

nata

ka.

Rs.5

,00,

000

(for

3 y

ears

)Rs

.64,

900

(Dir

ect

& n

o ov

erhe

ads)

Rs.6

4,90

0D

irec

t

4C

onse

rvat

ion

of e

nvir

onm

ent

by w

ay G

reen

nu

rtur

ing

prog

ram

me

in

Scho

ols

Cla

use

(iv)

of

Sche

dule

VII

of

the

Com

pani

es

Act

– e

nsur

ing

envi

ronm

enta

l su

stai

nabi

lity

and

ecol

ogic

al b

alan

ce

and

prot

ecti

on o

f en

viro

nmen

t

To c

reat

e aw

aren

ess

on

plas

tics

, Dis

trib

utio

n of

pl

ants

and

pro

tect

ion

of

flora

and

fau

na a

t Ba

ntw

al,

and

Man

galo

re, D

aksh

ina

Kann

ada

Dis

t, K

arna

taka

.

Rs.5

,00,

000

(for

3 y

ears

)Rs

.54,

420

(Dir

ect

& n

o ov

erhe

ads)

Rs.5

4,42

0D

irec

t

5A

ny o

ther

CSR

ac

tivi

ty

Sche

dule

VII

of t

he

Act

Rs.2

5,00

,000

(f

or 3

yea

rs)

--

-

6To

tal

Rs.

19,0

2,87

3

O

n B

ehal

f o

f th

e B

oar

d

Fo

r M

ang

alo

re S

EZ L

imit

ed

Plac

e: N

ew D

elhi

Pa

rito

sh K

um

ar G

up

ta

Srin

ivas

S K

amat

h

Dat

ed: 0

5th S

epte

mbe

r, 20

18

Man

agin

g D

irec

tor

Dir

ecto

r

DIN

: 010

5418

2 D

IN: 1

0790

43


51


I. REGISTRATION & OTHER DETAILS:

i CIN U45209KA2006PLC038590

ii Registration Date 24/02/2006

iii Name of the Company MANGALORE SEZ LIMITED

iv Category / Sub-category of the Company Company having Share Capital

v Address of the Registered office& contact details

3rd Floor, MUDA Building, Urwa Stores, Ashok Nagar, Mangaluru - 575 006, KarnatakaTel: 0824-2452760 Fax: 0824–2452749

vi Whether listed company No

vii Name, Address & contact detailsOf the Registrar & Transfer Agent, if any. Not Applicable

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10% or more of the total turnover of the company shall be stated:

Sl.No. Name and Description of main products / services

NIC Code of the Product / service* % tototal turn over of the company#

1 Development of Special Economic Zones (Lease Premium & Rent)

431: Demolition and site preparation* 10.00%

2 Water supply 360: Water collection, treatment and supply 60.00%

3 Sale of Power 351: Collection and distribution of electric energy

17.00%

* As per National Industrial Classification – 2008 Ministry of Statistics and Programme Implementation# On the basis of Gross Turnover (operations)

III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES -

Sl. No

Name and Address of the Company

CIN / GLN Holding/subsidiary/Associate

% of shares held

ApplicableSection

1 Mangalore STP Limited3rd Floor, MUDA Building, Urwa Stores, Mangalore-575006

U90009KA2011PLC057826 Subsidiary 70 2(87)(ii)

2 MSEZ Power Limited3rd Floor, MUDA Building, Urwa Stores, Mangalore-575006

U40104KA2014PLC077363 Subsidiary 100 2(87)(ii)

Annexure V TO DIRECTORS REPORT

Form No. MGT-9

EXTRACT OF ANNUAL RETURN as on the financial year ended on 31.03.2018

[Pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014]


52

IV SHAREHOLDING PATTERN (Equity Share capital Break up as % to total Equity)(i) Categorywise shareholding

Category of Shareholders

No. of Shares held at the beginning of the year

No. of Shares held at the end of the year

% change during

the year

Demat Physical Total% of Total

SharesDemat Physical Total

% of Total

Shares

A. Promoters

(1) Indian

a) Individual / HUF

0 1200 1200 0.0024 0 1200 1200 0.0024 0 0

b) Central Govt. or State Govt. 0 2,45,00,000 2,45,00,000 48.9988 0 2,45,00,000 2,45,00,000 48.9988 0 0

c) Bodies Corporates

0 2,55,00,000 2,55,00,000 50.9988 0 2,55,00,000 2,55,00,000 50.9988 0 0

d) Bank / FI 0 0 0 0 0 0 0 0 0 0

e) Any other 0 0 0 0 0 0 0 0 0 0

SUB TOTAL: (A) (1)

0 5,00,01,200 5,00,01,200 100 0 5,00,01,200 5,00,01,200 100 0 0

(2) Foreign

a) NRI - Individuals

0 0 0 0 0 0 0 0 0 0

b) Other Individuals

0 0 0 0 0 0 0 0 0 0

c) Bodies Corp. 0 0 0 0 0 0 0 0 0 0

d) Banks / FI 0 0 0 0 0 0 0 0 0 0

e) Any other … 0 0 0 0 0 0 0 0 0 0

SUB TOTAL (A) (2)

0 0 0 0 0 0 0 0 0 0

Total Shareholding of Promoter(A)=(A)(1)+(A)(2)

0 5,00,01,200 5,00,01,200 100 0 5,00,01,200 5,00,01,200 100 0 0


53


Category of Shareholders

No. of Shares held at the beginning of the year

No. of Shares held at the end of the year

% change during

the year

Demat Physical Total% of Total

SharesDemat Physical Total

% of Total

Shares

B. PUBLIC SHAREHOLDING

(1) Institutions

a) Mutual Funds 0 0 0 0 0 0 0 0 0 0

b) Bank / FI 0 0 0 0 0 0 0 0 0 0

c) Central Govt 0 0 0 0 0 0 0 0 0 0

d) State Govt 0 0 0 0 0 0 0 0 0 0

e) Venture Capital Fund 0 0 0 0 0 0 0 0 0 0

f) Insurance Companies 0 0 0 0 0 0 0 0 0 0

g) FIIS 0 0 0 0 0 0 0 0 0 0

h) Foreign Venture Capital Funds

i) others (specify) 0 0 0 0 0 0 0 0 0 0

SUB TOTAL: (B)(1) 0 0 0 0 0 0 0 0 0 0

(2) Non Institutions

a) Bodies Corporates 0 0 0 0 0 0 0 0 0 0

b) Individuals 0 0 0 0 0 0 0 0 0 0

i) Individual shareholders holding nominal share capitalupto Rs.1 lakhs

0 0 0 0 0 0 0 0 0 0

ii) Individuals shareholders holding nominal share capitalin excess of Rs.1 lakhs

0 0 0 0 0 0 0 0 0 0

c) Any Other (specify) NRIs

0 0 0 0 0 0 0 0 0 0

d) Foreign Bodies Corporate

0 0 0 0 0 0 0 0 0 0

SUB TOTAL (B) (2) 0 0 0 0 0 0 0 0 0 0

Total Public Shareholding(B)= (B)(1)+(B)(2)

0 0 0 0 0 0 0 0 0 0

C. Shares held by Custodian for GDRs & ADRs

0 0 0 0 0 0 0 0 0 0

Grand Total (A+B+C) 0 5,00,01,200 5,00,01,200 100 0 5,00,01,200 5,00,01,200 100 0 0


54

(ii) SHARE HOLDING OF PROMOTERS:

Sl. No

Shareholders Name

Shareholding at the beginning of the year

Shareholding at the end of the year %

change in share

Holding during

the year

No. of shares

% of totalsharesof the

company

% of sharespledged

encumberedto total shares

No. ofShares

% of total Shares of

thecompany

% of sharespledged

encumbered to total shares

1 Infrastructure Leasing and Financial Services Limited (IL&FS)

2,50,00,000 49.9988 0 2,50,00,000 49.9988 0 0

2 Oil and Natural Gas Corporation Limited (ONGC)

1,30,00,000 25.9994 0 1,30,00,000 25.9994 0 0

3 Karnataka Industrial Area Development Board

1,15,00,000 22.9994 0 1,15,00,000 22.9994 0 0

4 ONGC Mangalore Petrochemicals Limited

4,80,000 0.9600 0 4,80,000 0.9600 0 0

5 Kanara Chamber of Commerce & Industries

20,000 0.0400 0 20,000 0.0400 0 0

6 Shri V. Suryanarayana

100 0.0002 0 100 0.0002 0 0

7 Shri Rishi Bhardwaj

500 0.0010 0 500 0.0010 0 0

8 Shri Paritosh Kumar Gupta

500 0.0010 0 500 0.0010 0 0

9 Shri Diwakar Sinha 100 0.0002 0 100 0.0002 0 0

Total 5,00,01,200 100 0 5,00,01,200 100 0 0

(iii) CHANGE IN PROMOTERS’ SHAREHOLDING (SPECIFY IF THERE IS NO CHANGE):

Sl. No

Shareholding at the beginning of the Year

Cumulative Shareholding during the year

No. of Shares % of total shares of the company

No. of Shares % of total shares of the company

1 At the beginning of the year No changes in Promoters shareholding during the year

2 Date wise increase / decrease in Promoters Shareholding during the year specifying the reasons for increase / decrease (e.g. allotment / transfer / bonus / sweat equity etc.)

No changes in Promoters shareholding during the year

3 At the end of the year No changes in Promoters shareholding during the year


55


(iv) Shareholding Pattern of top ten Shareholders(Other than Directors, Promoters & Holders of GDRs & ADRs):

Sl. No

For Each of the Top 10 Shareholders

Shareholding at the beginning of the year Cumulative Shareholding during the year

No. of shares % of total shares of the company

No. of shares % of total shares of the company

Nil

(v) Shareholding of Directors and Key Managerial Personnel:

Sl. No

For Each of theDirectors & KMP

Shareholding at the end of the year

Cumulative Share holding during the year

No. of shares

% of total shares of the company

No. of shares

% of total shares of the company

1 Shri Shashi Shanker, ChairmanAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

2 Shri Paritosh Kumar Gupta, Managing DirectorAt the beginning of the yearDate wise Increase / Decrease in Shareholding during the year specifying the reasons for increase / decrease (e.g. allotment / transfer / bonus / sweat equity etc):At the end of the year

500

500

0.0010

0.0010

500

500

0.0010

0.0010

3 Shri I S N Prasad, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

4 Shri Saibal Kumar De, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

5 Shri Srinivas Santhayya Kamath, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

6 Smt C. Vathika Kamath, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

7 Shri H. Kumar, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

8 Shri A.K. Sahoo, DirectorAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

9 Shri Gouranga Charan Swain, Chief Financial OfficerAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil

10 Shri V. Phani Bhushan, Company SecretaryAt the beginning of the yearAt the end of the year

Nil Nil

NilNil

NilNil

NilNil


56

V. INDEBTEDNESSIndebtedness of the Company including interest outstanding / accrued but not due for payment

(Rs. in lakhs)

Particulars Secured LoansExcluding deposits

UnsecuredLoans Deposits Total

Indebtedness

Indebtedness at the beginning of the financial year i) Principal Amount ii) Interest due but not paidiii) Interest accrued but not due

57,910.51 -

-

---

---

57,910.51 -

-

Total (i+ii+iii) 57,910.51 - - 57,910.51

Change in Indebtedness during the financial year • Addition • Reduction

-629.80

- - -629.80

Net Change 629.80 - - 629.80

Indebtedness at the end of the financial year i) Principal Amount ii) Interest due but not paidiii) Interest accrued but not due

57,280.71--

- - 57,280.71--

Total (i+ii+iii) 57,280.71 - - 57,280.71

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A) Remuneration to Managing Director, Whole-time Directors and / or Manager:(Rs. in lakhs)

Sl. No Particulars of Remuneration

Name of MD / WTD / Manager Total

AmountShri Paritosh Kumar Gupta

1. Gross Salary(a) Salary as per provisions contained in section 17(1) of the

Income-tax Act, 1961(b) Value of perquisites u/s 17(2) Income-tax Act, 1961(c) Profits in lieu of salary under section 17(3) Income-tax Act,

1961

33.42

--

33.42

--

2. Stock Option - -

3. Sweat Equity - -

4. Commission- as % of profit- others, specify

--

--

5. Others, please specify - -

Total (A) 33.42 33.42


57


B. Remuneration to other directors:(Rs. in lakhs)

Sl. No

Particulars of Remuneration Name of Directors TotalAmountShri ISN Prasad Shri S.S. Kamath

1. Independent Director• Fees for attending board, Audit committee meetings• Commission• Others, please specify

1.75

--

2.00

--

3.75

--

Total (1) 1.75 2.00 3.75

2. Other Non-Executive Directors Shri Shashi Shanker, Shri H. Kumar, Shri A.K. Sahoo, Shri Saibal Kumar De and Smt. C. Vathika Kamath

Nil

Other Non-Executive Directors• Fees for attending board, committee meetings• Commission• Others, please specify

Nil Nil

3. Total (2) 0 -

4. Total (B) (1)+(2) 1.75 2.00 3.75

5. Total Managerial Remuneration (A+B)

37.17

6. Overall Ceiling as per the Act: For Managerial Person Rs.2,40,00,000 as per Schedule V section III (d) and the act provides for paying sitting fees up to Rs.1,00,000 per meeting.

C) Remuneration to Key Managerial Personnel Other Than MD / Manager / WTD:(Rs. in lakhs)

Sl. No Particulars of Remuneration

Key Managerial Personnel

Shri GourangaCharan Swain

Chief Financial Officer

Shri V. Phani BhushanCompany Secretary Total

1. Gross salary(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961(b) Value of perquisites u/s 17(2) Income-tax Act, 1961(c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961

61.70

-

-

21.23

-

-

82.93

-

-

2. Stock Option - - -

3. Sweat Equity - - -

4. Commission- as % of profit- others, specify

--

--

--

5. Others, please specify - - -

Total 61.70 21.23 82.93


58

VII. PENALTIES / PUNISHMENT / COMPOUNDING OF OFFENCES:

Type

Section of theCompanies

Act

BriefDescription

Details of Penalty /

Punishment /Compoundingfees imposed

Authority (RD /

NCLT/Court)

Appeal made

if any (givedetails)

A. COMPANY

Penalty Compounding

None

B. DIRECTORS

Penalty Punishment Compounding

None

C. OTHER OFFICERS IN DEFAULT

Penalty Punishment Compounding

None




59


Part – A: SubsidiariesAmount in Rupees

S.No ParticularsName of the Subsidiary

Mangalore STP Ltd MSEZ Power Ltd

1 Reporting Currency INR INR

2 Exchange Rate NA NA

3 Share Capital 5,00,000 5,00,000

4 Other Equity 0 (1,12,395)

5 Total Assets 58,33,436 5,77,445

6 Total Liabilities 58,33,436 5,77,445

7 Investment other than investment in Subsidiary 0 0

8 Turnover* 5,82,81,726 0

9 Profit / (Loss) before Tax 0 (16,924)

10 Provision for Taxation 0 0

11 Profit / (Loss) after taxation 0 (16,924)

12 Proposed Dividend 0 0

13 % of share holding 70 100

*turnover do not include other income

1. Names of subsidiaries which are yet to commence operations; MSEZ Power Ltd is yet to commence its operations.

2. Names of subsidiaries which have been liquidated or sold during the year; Not Applicable.

Part “B”: Associates and Joint Ventures – Not Applicable.


Annexure VI to Directors Report

Form AOC -1

Statement containing salient features of the financial statements of subsidiaries / associate companies / Joint ventures

Statement pursuant to first proviso to sub section (3) of section 129 of the companies act, 2013, read with rule 5 of companies (Accounts) Rules, 2014.



60

Report on the Standalone IND AS Financial Statements

We have audited the accompanying standalone IND AS financial statements of MANGALORE SEZ LIMITED (“the Company”), which comprise the Balance Sheet as at 31st March 2018, the Statement of Profit and Loss (including Other Comprehensive income), the Statement of Changes in Equity and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these standalone IND AS financial statements that give a true and fair view of the financial position, financial performance including Other Comprehensive Income, cash flows and the statement of changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) specified under under Section 133 of the Act read with companies (Indian Accounting Standard) Rules, 2015, as amended, and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit. In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order issued under section 143(11) of the Act. We conducted our audit of the standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF MANGALORE SEZ LIMITED


61


Place: New DelhiDate: 14.05.2018

For Maharaj N R Suresh and Co FRN001931S

Chartered Accountants

Sd/-N R Suresh

PartnerM.No: 021661

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2018, and its Profit, total comprehensive Income, its cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books

(c) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the statement of changes in equity, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone IND AS financial statements comply with the Accounting Standards specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors as on 31st March, 2018 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2018 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the company’s internal financial control over financial reporting.

(g) with respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

(i) the Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS financial statements - Refer Note No. 46(b ) to the financial statements;

(ii) the Company did not have any long-term contracts, including derivative contracts; and

(iii) There has not been an occasion in case of the Company during the year under report to transfer any sums to the investor Education and protection Fund. Therefore the question of delay in transferring such sums does not arise.

2. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of Sub-section (11) of Section 143 of the Act, we give in the Annexure “B” a statement on the matters specified in the Paragraphs 3 and 4 of the Order, to the extent applicable.


62

ANNEXURE “A” to The Independent Auditor’s Report of even date on the Standalone IND AS Financial Statements of Mangalore SEZ Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Mangalore SEZ Limited (“the Company”) as of March 31, 2018 in conjunction with our audit of the Standalone Ind AS Financial Statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s Management is responsible for establishing and maintaining internal financial controls based on “the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the Auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that:


63


(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and Directors of the company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Annexure “B” to the Independent Auditors’ Report of even date on the Standalone Ind AS Financial Statements of Mangalore SEZ Limited

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) These fixed assets have been physically verified by the Management at reasonable intervals which, in our opinion, is reasonable, having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) All the title deeds of immovable properties are held in the name of the Company except 320.2627 Acres of lease hold land amounting to Rs 576.06 Million not registered as on 31.03.2018.

(ii) The Management has carried out physical verification of Inventory at reasonable intervals and no material discrepancies were noticed.

(iii) The Company has not granted any loans secured or unsecured to companies, firms, Limited liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) The Company has complied with the provisions of Section 185 and 186 of the Companies Act, 1956 in respect of Investments provided by the company. The company has not granted loans or provided any guarantee or security to any company covered under Section 185

(v) The Company has not accepted any deposits from the public

(vi) The Central Government has not prescribed maintenance of cost records under section 148(1) of the Companies Act, 2013 for the industry in which the company is engaged


64

(vii) According to the information and explanations given to us in respect of Statutory dues:

(a) The company is regular in depositing with appropriate authorities undisputed statutory dues including Provident fund, Employees State insurance, Income Tax, Service tax, Sales Tax, Value added tax, Goods and Services Tax and other material statutory dues as applicable to it. There were no undisputed amounts payable in respect of Income Tax, Wealth tax, Service tax, Value added tax, Sales Tax and Goods and Services Tax were in arrears as at 31st March 2018 for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty, Service Tax and cess, which have not been deposited on account of any dispute

(viii) The Company has not defaulted in repayment of dues to financial institutions, banks, Government or to debenture holders.

(ix) In our opinion and according to the information and explanations given to us, the company has not raised any money by way of initial public offer or further public offer (including debt instruments) during the year and the term loans borrowed by the company have been applied for the purpose for the which the loans were obtained.

(x) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

(xi) The managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197, read with Schedule V to the Companies Act.

(xii) The Company is not a Nidhi company and hence clause (xii) of Paragraph 3 is not applicable to the Company.

(xiii) All Transactions with the related parties are in compliance with section 177 and 188 of Companies Act, 2013, where applicable and the details have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(xv) The company has not entered into any non-cash transactions with directors or persons connected with him.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.




Sd/-N R Suresh

PartnerM.No: 021661


65


Balance Sheet as at 31st March, 2018Amount in Rs.

Notes As at 31.03.2018

As at 31.03.2017

ASSETS(1) Non-current Assets

(a) Property, plant and equipment 3 8,23,30,87,352 5,36,72,81,001(b) Capital work in progress 4 1,70,57,29,852 4,50,84,97,393(c) Investment Property 5 4,49,88,53,447 4,43,64,25,151(d) Other Intangible Assets 6 13,87,56,612 14,53,91,636(e) Financial Assets (i) Investments 7 8,50,000 8,50,000 (ii) Trade Receivables 8 50,00,000 21,98,27,434 (iii) Loans 9 5,20,68,796 5,86,84,895 (iv) Others 10 25,000 25,000(f) Other non-current assets 11 26,64,53,309 22,78,42,795

14,90,08,24,368 14,96,48,25,305(2) Current Assets

(a) Financial Assets (i) Investments 12 54,86,69,727 18,27,24,487 (ii) Trade receivables 13 1,69,78,86,616 51,80,80,513 (iii) Cash and cash equivalents 14 8,11,89,585 42,83,30,572 (iv) Bank Balances other than (iii) above 15 16,19,96,375 13,04,21,495 (v) Loans 16 90,000 90,000 (vi) Others 17 96,70,530 42,86,355(b) Current tax asset (Net) 18 78,93,925 4,51,84,155(c) Other current assets 19 3,54,35,245 2,08,55,847

2,54,28,32,004 1,32,99,73,425Total Assets 17,44,36,56,372 16,29,47,98,730

EQUITY AND LIABILITIES(1) EQUITY

(a) Equity Share capital 20 50,00,12,000 50,00,12,000(b) Other equity 21 20,82,21,036 17,15,06,388

70,82,33,036 67,15,18,388LIABILITIES

(2) Non-current Liabilities(a) Financial Liabilities (i) Borrowings 22 5,62,92,06,409 5,72,49,45,643 (ii) Other financial liabilities 23 29,69,062 1,78,94,407(b) Provisions 24 1,49,99,448 1,32,24,441(c) Deferred tax liabilities (Net) 25 40,73,71,090 35,49,38,091(d) Other Non Current Liabilities 26 9,31,66,46,351 8,31,17,75,892

15,37,11,92,360 14,42,27,78,474(3) Current Liabilities

(a) Financial Liabilities (i) Trade payables 27 19,59,80,054 13,85,76,183 (ii) Other financial liabilities 28 83,49,63,185 82,53,17,458(b) Other current liabilities 29 25,25,97,331 14,90,50,716(c) Provisions 30 8,06,90,407 8,75,57,511

1,36,42,30,976 1,20,05,01,868Total Liabilities 16,73,54,23,336 15,62,32,80,342

Total Equity and Liabilities 17,44,36,56,372 16,29,47,98,730The accompanying notes are an integral part of these financial statements 1 to 47

As per our report attached For and on behalf of the Board For Maharaj N R Suresh and CoChartered Accountants(Firm's Registration No.001931S)

Sd/- Sd/- Sd/- N R Suresh Paritosh Kumar Gupta Akshaya Kumar Sahoo Partner Managing Director Director Membership No. 021661 DIN: 01054182 DIN: 07355933

Sd/- Sd/- Gouranga Charan Swain V. Phani Bhushan Chief Financial Officer Company Secretary

Place: New Delhi Place: New DelhiDate: 14/05/2018 Date: 14/05/2018


66

The accompanying notes are an integral part of these financial statements 1 to 47

As per our report attached For and on behalf of the Board For Maharaj N R Suresh and CoChartered Accountants(Firm's Registration No. 001931S)



Place: New Delhi Place: New Delhi Date: 14/05/2018 Date: 14/05/2018

Statement of Profit and Loss for the year ended 31st March, 2018Amount in Rs.

Particulars Notes Year 2017-18

Year 2016-17

I Revenue from Operations 31 1,74,23,05,353 1,28,52,36,171

II Other Income 32 3,14,10,362 6,20,10,928

III Total Income (I+II) 1,77,37,15,715 1,34,72,47,099

IV EXPENSES

Cost of Purchased Power 33 25,54,54,650 10,53,76,965

Employee benefit expense 34 8,10,11,267 6,69,13,202

Finance costs 35 50,90,28,931 53,34,80,331

Depreciation and amortisation Expense 36 41,46,02,971 29,33,30,830

Other expenses 37 40,44,33,248 25,67,22,037

Total Expense (IV) 1,66,45,31,067 1,25,58,23,365

V Profit / (loss) before exceptional items and tax (III - IV) 10,91,84,648 9,14,23,734

VI Exceptional items - -

VII Profit / (loss) before tax (V - VI) 10,91,84,648 9,14,23,734

VIII Tax expense 38

(1) Current tax 7,87,35,681 1,99,36,193

(2) Deferred tax (61,39,396) 13,13,46,605

Total Tax expense 7,25,96,285 15,12,82,798

IX Profit / (loss) for the period from continuing operations (VII - VIII) 3,65,88,364 (5,98,59,063)

X Profit / (loss) from discontinued operations - -

XI Tax expense of discontinued operations - -

XII Profit / (loss) from Discontinued operations (after tax) (X -XI) - -

XIII Profit / (loss) for the period (IX + XII) 3,65,88,364 (5,98,59,063)

XIV Other Comprehensive Income

A (i) Items that will not be reclassified to profit or loss

(a) Remeasurement of the defined benefit plans (net of tax) 1,26,284 (14,41,879)

(ii) Income tax relating to items that will not be reclassified to profit or loss - -

B (i) Items that will be reclassified to profit or loss - -

(ii) Income tax relating to items that will be reclassified to profit or loss - -

1,26,284 (14,41,879)

XV Total Comprehensive Income for the period (XIII+XIV) (Comprising Profit (Loss) and Other Comprehensive Income for the period)

3,67,14,648 (6,13,00,942)

XVI Earnings per equity share:

(1) Basic 0.73 (1.20)

(2) Diluted


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Statement of Changes in Equity for the year ended March 31, 2018

(A) Equity Share CapitalAmount in Rs.

Balance at the beginning of the reporting period April 01, 2017 50,00,12,000

Changes in equity share capital during the year -

Balance at the end of the reporting period March 31, 2018 50,00,12,000

(B) Other Equity Amount in Rs.

Reserves and SurplusTOTAL

Retained Earnings Balance at the beginning of the reporting period April 01, 2017 - (A)

17,15,06,388 17,15,06,388

Additions during the year: Profit / (Loss) for the year 3,65,88,364 3,65,88,364 Items of OCI for the year, net of taxes: Remeasurment benefit of defined benefit plans 1,26,284 1,26,284 Total Comprehensive Income for the year 2017-18 - (B) 3,67,14,648 3,67,14,648 Reductions during the year: Dividends - - Income tax on dividends Transfer to general reserves - - Total (C) - - Balance at the end of the reporting period March 31, 2018 (A+B-C)

20,82,21,036 20,82,21,036






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Cash Flow Statement for the year ended 31st March, 2018 Amount in Rs.

Particulars Year 2017-18

Year 2016-17

A. CASH FLOW FROM OPERATING ACTIVITIESProfit before tax 10,91,84,648 9,14,23,734Adjustments for:- Depreciation, Depletion, Amortisation & Impairment

41,46,02,971 29,33,30,830

- Impairment 7,09,24,536 1,31,37,275- Interest on Borrowings 49,84,20,778 49,27,82,572- Interest on security deposits measured at fair value 6,20,401 - - Provision for Gratuity 23,22,202 26,51,493- Provision for Leave Encashment 22,99,565 36,95,938- Provision for other Employee benefits 84,30,000 35,16,782- Interest Income (1,32,17,074) (1,97,89,609)- Interest from security deposits measured at fair value

(8,11,781) -

- Dividend Income (1,40,70,240) (96,20,005)- Deferred Government Grant (8,25,000) -- Other (describe) - (Profit) / Loss on sale of asset & Loss on sale of asset

1,889 22,598

Operating Profit before Working Capital Changes 1,07,78,82,895 87,11,51,608Adjustments for:-- (Increase) / decrease in Trade and other receivables (1,03,59,03,205) (49,43,57,384)- (Increase) / decrease in Other assets (10,33,89,743) 23,20,23,624 - Increase / (Decrease) in Trade payable and other liabilities

1,08,60,60,380 48,31,04,987

Increase / (Decrease) in provisions (51,04,799) (49,51,885)Cash generated from Operating activities 1,01,95,45,528 1,08,69,70,951 Income Tax Paid (Net of refund) 2,34,69,924 4,05,81,487 Net Cash generated from Operating activities 99,60,75,604 1,04,63,89,464

B. CASH FLOW FROM INVESTING ACTIVITIESPayments for Property, plant and equipment (44,82,48,898) (68,56,25,833)Payments for investment property (6,24,28,296) (3,75,38,588)Payments for intangible assets - (1,65,000)Proceeds from sale of Property, plant and equipment 5,000 2,200Receipt of government grants 2,97,00,000 2,97,00,000Dividend received from Others 1,40,70,240 96,20,005Interest received 1,36,03,982 2,13,24,989Net Cash used in Investing activities (45,32,97,975) (66,26,82,229)

C. CASH FLOW FROM FINANCING ACTIVITIES:Proceeds from non-current borrowings - 6,37,42,71,086 Repayment of non-current borrowings (6,61,05,000) (6,44,97,28,408)Finance Cost paid (51,78,68,376) (60,40,95,929)Other (describe) - Net Transaction Cost of Refinanced LoanNet Cash used in Financing activities (58,39,73,376) (67,95,53,251)

D. Net increase / (decrease) in cash and cash Equivalents (A+B+C):

(4,11,95,747) (29,58,46,016)

Add: Cash and Cash Equivalents as at 1st April 67,10,55,059 96,69,01,074

Cash and Cash Equivalents as at 31st March 62,98,59,312 67,10,55,059


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Amount in Rs.

iv Cash and cash Equivalents as per above comprises of: As at March 31, 2018

As at March 31, 2017

Balances with Banks:

Current account 4,08,21,108 6,78,86,971

Deposits with original maturity of less than three months 4,03,60,392 36,04,36,985

Deposits with original maturity of more than three months - 6,00,00,000

Cash on hand 8,085 6,616

Add: Investment in liquid mutual funds 54,86,69,727 18,27,24,487

Cash and Cash equivalents in Cash Flow Statement 62,98,59,312 67,10,55,059


Sd/- Sd/- Sd/- N R Suresh Paritosh Kumar Gupta Akshaya Kumar Sahoo Partner Managing Director Director Membership No.021661 DIN: 01054182 DIN: 07355933



Notes:

i The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Indian Accounting Standard (Ind AS) 7 on Cash Flow statements.

ii Payments for property, plant and equipment includes movement of Capital Work-in-progres during the year.

iii Brackets indicate cash outflow / deduction.


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Notes accompanying financial statements1. Corporate information

Mangalore SEZ Limited (MSEZ) is a Public Limited Company domiciled and incorporated in India having its Registered Office at 3rd Floor, Mangalore Urban Development Authority (MUDA) Building, Urwa Stores, Ashok Nagar, Mangalore - 575 006.

The Company is jointly promoted by Karnataka Industrial Area Development Board (KIADB), Oil & Natural Gas Corporation Limited (ONGC) and Infrastructure Leasing and Financial Services Limited (IL&FS).

The company’s shares are unlisted and the Company is engaged in developing and maintenance of Special Economic Zone (SEZ) at Mangaluru.

2. Significant accounting policies

2.1 Statement of compliance

The Standalone Financial Statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 and Technical Guide on Accounting for Special Economic Zones (SEZs) Development Activities, issued by the Institute of Chartered Accountants of India.

2.2 Basis of Preparation

The Standalone Financial Statements have been prepared on the historical cost basis except for certain assets and liabilities that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or noncurrent as per the Company’s operating cycle and other criteria set out in Ind AS-I Presentation of Financial Statements (Ind AS-I) and Schedule III to the Companies Act, 2013.

The Standalone Financial Statements are presented in Indian Rupees.

Fair value Measurement

The Company measures financial instruments at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the assets in its highest and best use.


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The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets and liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement at a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.

2.3 Investments in subsidiaries

The Company records the investments in subsidiaries at cost less impairment loss, if any.

2.4 Non-current assets held for sale

Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the assets or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Property, Plant and Equipment and intangible assets are not depreciated or amortized once classified as held for sale.

2.5 Accounting for Government Grants and Disclosure of Government Assistance

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.

These are recognized in the Standalone Statement of Profit and Loss on a systematic basis over the periods in which the Company recognizes the related costs for which the grants are intended to compensate.


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Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized at fair value as deferred revenue and disclosed as ‘Deferred revenue arising from government grant a liability in the Standalone Balance Sheet and transferred to the Standalone Statement of Profit and Loss on a systematic and rational basis over the useful lives of the related assets.

2.6 Tangible Assets – Property, Plant and Equipment

Buildings held for use in the production or supply of goods or services or for administrative purposes, are stated in the Standalone Balance Sheet at cost less accumulated depreciation and impairment losses, if any.

PPE in the course of construction for production, supply or administrative purposes are carried at cost less accumulated depreciation less any recognized impairment loss. The cost of an asset comprises its purchase price or its construction costs (net of applicable tax credits) and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the Management. It includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Company’s accounting policy. Such properties are classified to the appropriate categories of PPE when completed and ready for intended use. Parts of an item of PPE having different useful life and material value and subsequent expenditure on PPE arising on account of capital improvement or other factors are accounted for as separate components.

Depreciation of these PPE commences when the assets are ready for their intended use.

Depreciation is provided on the cost of PPE less residual value, under straight-line method in accordance with the Schedule II to the Companies Act, 2013 adopting the useful life for assets as specified therein, except for the following, whose useful life have been taken on the basis of the technical certification obtained. However, the management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.

Asset Useful life (in years)

Electrical Installations & Equipments 15

Hydraulic works, pipelines & sluices 30

Marine Pipeline Asset – Pipeline Inside Sea 15

TTP Water Membranes 7

Corridor 30

Common Effluent Treatment Plant 15

Depreciation on power distribution assets is provided at the rate of depreciation notified by Central Electricity Regulatory Commission (CERC).

Buildings and pipelines related to River Water System, Tertiary Treatment Plant and Water Treatment Plant are depreciated on Units of Production Method.

The estimated useful lives and residual values are reviewed at the end of each year and if necessary, changes in estimates are accounted for prospectively.

Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.

An item of PPE is de-recognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sale proceeds and the carrying amount of assets and is recognized in the Statement of Profit and Loss.


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2.7 Investment properties (Freehold Land): Property (Freehold Land) that is held for long-term rental yields or for capital appreciation or both, and

that is not occupied by the company, is classified as investment property. Investment properties are measured initially at its cost, including related transaction costs, and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

2.8 Intangible Assets

(i) Intangible Assets and Amortization

Intangible assets acquired are measured on initial recognition at cost.

Intangible assets are recognized when it is probable that the future economic benefits that are attributable to the assets will flow to the Company and the cost of the asset can be measured reliably and are amortized under straight line method as follows:

- Specialized software over a period of 5 years from the month of addition.

- Cost of Barrage usage Rights is amortized on a straight line basis over the lease period/life of the underlying asset whichever is less and determined at 25 Years.

(ii) De-recognition of Intangible Assets An intangible asset is derecognized on disposal, or when no future economic benefits are expected

from use or disposal. When the asset is derecognized, Gains or losses, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized as impairment in the Statement of Profit & Loss.

2.9 Impairment of Tangible and Intangible Assets The Company reviews the carrying amount of its tangible and intangible assets, Property, Plant and

Equipment (including Capital Works in progress) annually to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.

An assessment is made annually as to see if there are any indications that impairment losses recognized earlier may no longer exist or may have come down. The impairment loss is reversed, if there has been a change in the estimates used to determine the asset’s recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in


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future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of impairment loss are recognized in the Statement of Profit and Loss.

2.10 Inventories Inventories are valued at lower of cost (weighted average method) and net realizable value.

Unserviceable and scrap items, when determined, are valued at estimated net realizable value less all costs necessary to make the sale.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.11 Ind AS 115 - Revenue from Contracts with Customers The standard is notified on 28.03.2018 and it is applicable for the accounting periods commencing on or

after 01.04.2018. Accordingly, this standard is not applicable for preparation of the financial statement for the year ended 31.03.2018. However, application of this standard from 01.04.2018 does not have any impact in the revenue recognition and measurement for the company.

2.12 Revenue recognition Revenue is recognized at the fair value consideration received or receivable when consideration can be

reasonably measured and there exists reasonable certainty of its recovery.

Lease Income and Lease rentals paid are recognized in accordance with the recognition and measurement principles as per Ind AS 17 – Leases

a) Lease Premium: Lease Premium received / receivable are recognized on straight line basis over the lease term as

specified in the lease agreements.

b) Lease Rentals: Lease rentals are recognized as and when they fall due as per the terms of the lease agreements.

c) Sale of Goods Revenue arising from sale of goods is recognized when the significant Risks and Rewards are passed

to the buyer and the company does not retain any managerial involvement in the goods transferred and the amount of revenue can be measured reliably.

1. Income from River water and Tertiary Treatment Plant (TTP) are recognized on the basis of quantity committed / delivered to the units and invoiced at the agreed rates.

2. Income from licensed activity (distribution of power) is recognized as per actual consumption billed at Karnataka Electricity Regulatory Commission (KERC) approved tariff.

d) Sale of Services Revenue from services is recognized when the outcome of services can be estimated reliably and it is

probable that the economic benefits associated with rendering of services will flow to the Company, the amount of revenue can be measured reliably.

1. Operation and Maintenance charges (O&M) are recognized based on the agreement with the units. Where agreements are not finalized, O&M charges are recognized at cost plus markup.

2. Marine outfall usage charges received in advance are recognized over the useful life of the asset on proportionate basis.

3. Corridor usage charges received in advance are recognized over the useful life of the asset on proportionate basis.


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e) Non-Operating Revenue

1. Dividend income from the investments is recognized when the right to receive payment is established.

2. Interest income from financial assets is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is that rate exactly discounts the estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount on initial recognition.

3. Rental and other charges for usage of long term assets of the company which do not partake the character of lease, are recognized as and when they fall due as per the terms of the agreements.

2.13 Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

A lease is classified at the inception date as a finance lease or an operating lease.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to the ownership of an asset. Lease other than financial lease are classified as operating lease.

AS LESSEE:

Land acquired from KIADB on a long term lease cum sale and to be converted into a sale subject to fulfillment of the terms and conditions is treated as finance lease and recognized under Investment Property.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Prepayments towards operating lease are amortized on straight line basis over the period of the lease. Contingent rentals, if any, arising under operating leases are recognized as an expense in the period in which they are incurred.

AS LESSOR:

Lease agreements with a definite term with no stipulation for transfer of the ownership of the asset by the end of the lease term or for further renewal, are treated as operating lease.

Lease Premium:

Lease Premium received / receivable are recognized on straight line basis over the lease term as specified in the lease agreements.

Lease Rentals:

Lease rentals are recognized as and when they fall due as per the terms of the lease agreements

2.14 Foreign Exchange Transaction

The functional currency of the Company is Indian Rupees which represents the currency of the economic environment in which it operates.

A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.


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At the end of each reporting period:

a. Foreign currency monetary items are translated using the closing rate.

b. Non Monetary items measured in terms of historical cost in foreign currency are translated using the exchange rate at the date of the transaction.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition or in the previous financial statements are recognized in the statement of profit and loss of the period.

2.15 Employee Benefits

a) Short term employee benefits All employee benefits that are expected to be settled wholly before twelve months after the end of

the annual reporting period in which the employees render the related service are classified as short term employee benefits.

All short term employee benefits are recognized at the undiscounted amount in the accounting period in which they are incurred.

b) Post-employment benefits i) Defined Contribution Plans: The provident fund scheme and the employee pension scheme are

defined contribution plans. The contribution paid / payable under the schemes are recognized during the period in which the employee renders the related service.

ii) Defined Benefit plans: The employee’s gratuity liability is the company’s defined benefit plan. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the term of related obligations.

Actuarial gains and losses are recognized immediately in Other Comprehensive Income (OCI).

c) Long term employee benefits

The obligation for long term employee benefits such as long term compensated absences is recognized in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

2.16 Taxes on Income

Income tax expense represents the aggregate of Current tax and Deferred tax.

i) Current tax Current tax is the amount of Income tax payable in respect of the taxable profit for a period.


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Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect of situations in which applicable tax regulations re subject to interpretation ad establishes provisions where appropriate.

ii) Deferred Tax

Deferred tax is recognized on deductable / taxable temporary differences between the carrying amounts of assets and liabilities in the Financial Statement and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to get future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with asset will be realized.

iii) Current and deferred tax for the year

Current and deferred tax are recognized in the Statement of Profit and Loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

2.17 Borrowing Costs

Borrowing costs specifically identified in the acquisition or construction of qualifying assets is capitalized as part of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to the Statement of Profit and Loss applying the “effective interest method” as described in Ind AS 109, Financial Instruments.

Borrowing Cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.


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2.18 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

Contingent assets are disclosed in the Financial Statements by way of notes to accounts where an inflow of economic benefits is probable.

Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.

2.19 Financial instruments

A Financial Instrument is a contract that gives rise to a financial asset or a financial liability or an equity instrument of another entity.

Financial assets and financial liabilities are recognized when Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the Statement of Profit and Loss.

2.20 Financial assets

Cash and cash equivalents

The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.

Financial assets at amortized cost

Financial assets are subsequently measured at amortized cost using the effective interest method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income

Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company has made an irrevocable election to present in other comprehensive income subsequent changes in the fair value of equity investments not held for trading.


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Financial assets at fair value through profit or loss

Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition.

Impairment of financial assets

In accordance with Ind AS 109, the group applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure.

a) Lease receivables under Ind AS 17.

b) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.

The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:

Trade receivables or contract revenue receivables; and

All lease receivables resulting from transactions within the scope of Ind AS 17

The application of simplified approach does not require the group to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

For recognition of impairment loss on other financial assets and risk exposure, the group determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.

Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.

ECL is the difference between all contractual cash flows that are due to the group in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:

All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rate cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.

Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income /expense in the statement of profit and loss (P&L). This amount is reflected under the head ‘other expenses’ in the P&L. The balance sheet presentation for various financial instruments is described below:

Derecognition of financial assets

The Company de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.


80

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in the Statement of Profit and Loss.

2.21 Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and delivered financial instruments.

The measurement of the financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit and loss

Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near team. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the profit and loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains / losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amorisation is included as finance costs in the statement of profit and loss.

The category generally applies to borrowings.

Financial guarantee contracts

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor falls to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are


81


recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Financial liabilities

Financial liabilities are measured at amortized cost using the effective interest method.

De-recognition of financial liabilities

The Company de-recognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognized and the consideration paid and payable is recognized in the Statement of Profit and Loss.

2.22 Earnings per share

Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.

2.23 Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

2.24 Operating Segments

Operating Segments are identified based on the business activities from which they earn revenue and incur expenses and whose operating results are regularly reviewed by the entities Chief operating decision maker and for which discrete financial information is available.

2.25 Critical Accounting Judgments and Key Sources of Estimation Uncertainty

Application of many of the accounting policies used in preparing the Financial Statements, MSEZ Management makes judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual outcomes could differ from the estimates and assumptions used.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.


82

Key source of judgments and estimation of uncertainty in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment, useful lives of Property, Plant and Equipment, retirement benefit obligations, provisions, valuation of deferred tax assets and contingent assets & liabilities.

2.26 Critical judgments in applying accounting policies

The following are the critical judgments, apart from those involving estimations (Refer note 47), that the Management have made in the process of applying the Company's accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.

2.27 Key sources of estimation uncertainty

Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.

a) Impairment of assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired, if any indication exists, or when annual impairment testing for an asset is required, the Company estimates that asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash flows that are largely independent of those from other assets or groups of assets, when the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.

Impairment losses of continuing operations, including impairment on investments, are recognized in the statement profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties, the impairment is recognized in OCI up to the amount of any previous revaluation surplus.


83


For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

b) Defined benefit obligation (DBO)

Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.


84

No

te 3

: Pro

per

ty, p

lan

t &

eq

uip

men

tA

mou

nt in

Rs.

Gro

ss c

arry

ing

amou

ntD

epre

ciat

ion

/Am

ortis

atio

nN

et c

arry

ing

amou

nt

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

arD

educ

tions

/Ad

just

men

tsAs

at

31

.03.

2018

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

arD

educ

tions

/Ad

just

men

tsAs

at

31

.03.

2018

As a

t

31.0

3.20

18As

at

31

.03.

2017

Land

- Le

aseh

old

36,2

3,74

5 -

- 36

,23,

745

4,30

,270

2,17

,194

-6,

47,4

6429

,76,

281

31,9

3,47

5

Build

ings

1,48

,17,

64,8

192,

84,3

8,21

,674

4,32

,55,

86,4

934,

53,7

4,37

411

,78,

36,0

51-

16,3

2,10

,425

4,16

,23,

76,0

681,

43,6

3,90

,445

Plan

t and

equ

ipm

ent

3,69

,47,

98,0

8231

,72,

48,6

91 -

4,01

,20,

46,7

7322

,02,

50,4

7412

,62,

59,6

93 -

34,6

5,10

,167

3,66

,55,

36,6

063,

47,4

5,47

,608

Furn

iture

and

fix

ture

s78

,72,

460

6,76

,354

-85

,48,

814

27,5

4,09

710

,76,

213

-38

,30,

310

47,1

8,50

451

,18,

363

Vehi

cles

1,91

,55,

739

- -

1,91

,55,

739

16,8

2,68

722

,74,

744

-39

,57,

431

1,51

,98,

308

1,74

,73,

052

Offic

e eq

uipm

ent

58,2

2,17

74,

54,6

8638

,692

62,3

8,17

127

,01,

692

12,9

5,47

831

,803

39,6

5,36

722

,72,

804

31,2

0,48

5

Road

s69

,72,

60,1

3711

,15,

79,7

81-

80,8

8,39

,918

26,9

8,22

,563

15,9

0,08

,574

-42

,88,

31,1

3738

,00,

08,7

8142

,74,

37,5

74

Tota

l5,

91,0

2,97

,159

3,27

,37,

81,1

8638

,692

9,18

,40,

39,6

5354

,30,

16,1

5740

,79,

67,9

4731

,803

95,0

9,52

,301

8,23

,30,

87,3

525,

36,7

2,81

,001

Prev

ious

Yea

r5,

18,5

1,25

,497

72,9

3,30

,050

41,5

8,38

85,

91,0

2,97

,159

25,6

5,21

,966

28,7

0,20

,078

5,25

,887

54,3

0,16

,157

5,36

,72,

81,0

024,

92,8

6,03

,531

3(i)

Int

eres

t ca

pita

lized

dur

ing

the

year

Rs.

2,2

5,73

,364

(pr

evio

us y

ear

- N

IL)

3(ii)

The

com

pany

has

tak

en b

orro

win

gs f

rom

ban

k w

hich

car

ry c

harg

e ov

er a

ll th

e as

sets

of

the

com

pany

(re

fer

Not

e no

.22

tow

ards

sec

urit

y an

d pl

edge

).

3(iii

) Ref

er N

ote

No.

46 (

a) f

or d

iscl

osur

e of

con

trac

tual

com

mit

men

ts f

or a

cqui

siti

on o

f Pr

oper

ty, P

lant

& E

quip

men

t

3(iv

) Co

rrid

or

Ass

et:

In t

he d

evel

opm

ent

of t

he S

peci

al E

cono

mic

Zon

e (S

EZ),

the

Com

pany

has

set

up

a Pi

pelin

e-cu

m-R

oad

Cor

rido

r Pr

ojec

t fr

om N

ew M

anga

lore

Po

rt T

rust

(N

MPT

) to

Man

galo

re S

EZ (

MSE

Z).

The

proj

ect

has

been

dev

elop

ed o

n a

self-

sust

aina

ble,

cos

t an

d re

venu

e m

odel

und

er a

n ag

reem

ent

wit

h tw

o cu

stom

ers

viz.

, MRP

L an

d O

MPL

.

In

ter

ms

of t

he a

gree

men

t:

(i)

A

ll th

e th

ree

part

ies

have

con

trib

uted

in e

qual

sha

res

tow

ards

cos

t of

the

pro

ject

;

(ii

) Th

e ti

tle,

ow

ners

hip,

pos

sess

ion

and

mai

nten

ance

of

the

asse

ts v

ests

wit

h M

SEZ

only

;

(ii

i) O

MPL

and

MRP

L ha

ve b

een

give

n pe

rpet

ual r

ight

s to

use

the

cor

rido

r fo

r sp

ecifi

ed w

idth

leav

ing

subs

tant

ial w

idth

of

the

corr

idor

for

co

mm

erci

al e

xplo

itat

ion

by M

SEZL

(iv

) T

he ‘u

sers

hip

fee’

rel

atin

g to

the

wid

th a

lloca

ted

to O

MPL

and

MRP

L on

‘cos

t ba

sis’

is a

djus

ted

agai

nst

the

cont

ribu

tion

and

the

bal

ance

is

als

o tr

eate

d as

‘use

r fe

e’ b

ut r

ecko

ned

for

‘res

idua

l con

trib

utio

n’.

(v

) Th

e re

venu

e on

the

cor

rido

r pr

ojec

t fr

om t

hird

par

ty c

usto

mer

s ac

crue

to

the

thre

e pa

rtie

s in

the

rat

io o

f th

eir

‘res

idua

l con

trib

utio

ns’.


85


Note 4: Capital work in progress

Amount in Rs.

Particulars As at 31.03.2018 As at 31.03.2017

Capital work in progress

Development of Land 1,02,73,01,082 99,03,77,223

Infrastructure Development 67,84,28,770 3,51,81,20,170

Total 1,70,57,29,852 4,50,84,97,393

4(i) Capital work in progress includes interest capitalized during the year NIL (March 31, 2017 Rs.11,03,21,219/-)

4(ii) Capital work in progress includes Rs.1,02,33,74,602 as at March 31, 2018 (Rs.99,03,77,223 as at March 31,

2017) mandatory and unavoidable expenditure incurred on creation of infrastructure at R&R colony, pursuant

to the Government of Karnataka Order No.KE 309 REH, 2006, Bangalore dated 20.06.2007. The expenditure

will be transferred to the cost of land in the year in which the obligation is completed.

4(iii) The Company has an obligation vide Government Order no. RD 309 REH 2006 dated 20.06.2007 to provide

various compensations to the Project Displaced Families (PDFs) including one job per family and sites for

construction. The PDFs can opt for cash in lieu of site and cash in lieu of job. The estimated provision in respect

of various compensations is as under which has been included in development of land.

Amount in Rs.


Rehabilitation Compensation including training 61,97,591 1,12,11,961

Rehabilitation Colony Development Cost 7,22,44,681 7,51,63,040

Total 7,84,42,272 8,63,75,001

The Company has made the above provision based on present obligation as a result of past event. Further,

the said R&R package has been amended vide G.O. no. RD 116 REH 2011 dated 02.12.2011 by including the

following:

a) Exit Option - the PDF’s can opt for an ex-gratia cash in lieu of employment, in addition to the one time

cash compensation payable as per earlier G.O.

b) Payment of stipend/sustenance allowance to PDF/nominees who do not opt for the ex-gratia as mentioned

in option (a) above.

4(iv) The company has taken borrowings from bank which carry charge over all the assets of the company (refer

Note no.22 towards security and pledge).

4(v) Refer Note No.46 (a) for disclosure of contractual commitments for acquisition of Plant, Property & Equipment.


86

No

te 5

: In

vest

men

t Pr

op

erty

Am

ount

in R

s.

Gro

ss c

arry

ing

amou

nt A

mor

tisat

ion

Net

car

ryin

g am

ount

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

ar

Ded

uctio

ns/

Adju

stm

ents

As a

t

31.0

3.20

18As

at

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

ar

Ded

uctio

ns/

Adju

stm

ents

As a

t

31

.03.

2018

As a

t

31.0

3.20

18As

at

31

.03.

2017

Land

- Le

ase

cum

Sal

e4,

43,6

4,25

,151

6,24

,28,

296

- 4,

49,8

8,53

,447

- -

- -

4,49

,88,

53,4

474,

43,6

4,25

,151

Prev

ious

Ye

ar4,

39,8

8,86

,563

5,03

,63,

250

1,28

,24,

662

4,43

,64,

25,1

51-

--

-4,

43,6

4,25

,151

4,39

,88,

86,5

63

5(i)

Refe

r no

te 4

5 on

'am

ount

s re

cogn

ised

in s

tate

men

t of

pro

fit &

loss

acc

ount

'.

5(ii)

N

o fa

ir v

alue

has

bee

n ob

tain

ed f

or in

vest

men

t pr

oper

ty.

5(iii

) Re

fer N

ote

No.

46 (a

) for

dis

clou

re o

f con

trac

tual

obl

igat

ion

to p

urch

ase,

con

stru

ct o

r dev

elop

inve

stm

ent p

rope

rty

or fo

r its

repa

irs,

mai

nten

ance

or e

nhan

cem

ent.

5(iv

) Re

fer

Not

e 39

(i) o

n Fi

nanc

e le

ase.

No

te 6

: Oth

er In

tan

gib

le A

sset

s A

mou

nt in

Rs.

Gro

ss c

arry

ing

amou

nt

Am

ortis

atio

nN

et c

arry

ing

amou

nt

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

ar

Ded

uctio

ns/

Adju

stm

ents

As a

t

31.0

3.20

18As

at

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

ar

Ded

uctio

ns/

Adju

stm

ents

As a

t

31

.03.

2018

As a

t

31.0

3.20

18As

at

31

.03.

2017

Inta

ngib

le A

sset

s

Spec

ialis

ed

Softw

are

1,65

,005

- -

1,65

,005

17,9

0133

,000

-50

,901

1,14

,104

1,47

,104

Barra

ge u

sage

rig

hts

15,8

4,48

,580

- -

15,8

4,48

,580

1,32

,04,

048

66,0

2,02

4-

1,98

,06,

072

13,8

6,42

,508

14,5

2,44

,532

Tota

l15

,86,

13,5

85 -

- 15

,86,

13,5

851,

32,2

1,94

966

,35,

024

- 1,

98,5

6,97

313

,87,

56,6

1214

,53,

91,6

36

Prev

ious

Yea

r15

,84,

48,5

85 1

,65,

000

-15

,86,

13,5

8566

,02,

024

66,1

9,92

5-

1,32

,21,

949

14,5

3,91

,636

15,1

8,46

,561

6(i)

The

com

pany

has

tak

en b

orro

win

gs f

rom

ban

k w

hich

car

ry c

harg

e ov

er a

ll th

e as

sets

of

the

com

pany

(re

fer

Not

e no

.22

tow

ards

sec

urit

y an

d pl

edge

).


87


Note 7: Investments Amount in Rs.

Particulars No.of shares

Face value (Rs.)

As at 31.03.2018

As at 31.03.2017

Investments in Equity Instruments

Unquoted Equity Shares

(i) Subsidiaries (measured at cost)

a) MSEZ Power Limited, Mangalore (Wholly owned subsidiary)

50,000 10 5,00,000 5,00,000

50,000 shares as on March 31, 2018; 50,000 shares as on March 31, 2017

b) Mangalore STP Limited, Mangalore (Partly owned subsidiary)

35,000 10 3,50,000 3,50,000

35,000 shares as on March 31, 2018; 35,000 shares as on March 31, 2017

Total 8,50,000 8,50,000

Aggregate amount of unquoted investments - At Cost 8,50,000 8,50,000

Note 8: Trade ReceivablesAmount in Rs.

Particulars As at 31.03.2018

As at 31.03.2017

Trade receivables

(a) Secured, considered good - -

(b) Unsecured, considered good 50,00,000 21,98,27,434

(c) Unsecured, considered doubtful debts - -

Less: Allowance for doubtful debts - -

Total 50,00,000 21,98,27,434

Note 9: LoansAmount in Rs.


As at 31.03.2017

Security Deposit 5,20,68,796 5,86,84,895

Total 5,20,68,796 5,86,84,895

Break-up for Security DetailsAmount in Rs.


As at 31.03.2017

Secured, Considered good - -

Unsecured, considerd good 5,20,68,796 5,86,84,895

Unsecured, considered doubtful - -

Total 5,20,68,796 5,86,84,895


88

Note 10: Other Financial AssetsAmount in Rs.


As at 31.03.2017

Balance with banks (more than 12 months) 25,000 25,000Total 25,000 25,000

Note 11: Other Non current Assets Amount in Rs.


As at 31.03.2017

Capital Advances: 3,35,20,822 4,13,10,575Others- Security deposits 58,70,234 - - Income Tax (Net of Provision) 22,70,62,253 18,65,32,220Total 26,64,53,309 22,78,42,795

Note 12: InvestmentsAmount in Rs.

ParticularsAs at

31.03.2018As at

31.03.2017

Investments in Mutual Funds - Quoted

(i) UTI Liquid cash plan - Institutional - Direct Plan - Daily dividend reinvestment

1,47,641.072 units of face value Rs.1019.4457 each (Previous year 1,79,239.058 units of face value Rs.1019.4457)

15,05,12,056 18,27,24,487

(ii) SBI Magnum Insta Cash Fund - Direct Plan - Daily Dividend

2,37,701.815 units of face value Rs.1675.03 each 39,81,57,671 -

Total 54,86,69,727 18,27,24,487

Aggregate amount of quoted investments - At market value 54,86,69,727 18,27,24,487



As at 31.03.2017

Trade receivables(a) Secured, considered good - - (b) Unsecured, considered good 1,69,78,86,616 51,80,80,513(c) Unsecured, considered doubtful debts 18,13,90,689 11,04,66,153

1,87,92,77,305 62,85,46,666Less: Allowance for doubtful debts 18,13,90,689 11,04,66,153Total 1,69,78,86,616 51,80,80,513

The trade receivables includes Rs. 85.58 crore due from a customer for more than a year which in the opinion of the management does not require an impairment provision as dues have been confirmed by the customer by their letter dated April 16, 2018.


89


Note 14: Cash and Bank BalancesAmount in Rs.


As at 31.03.2017

(A) Cash and Cash Equivalents

(a) Balances with banks:

Current accounts 4,08,21,108 6,78,86,971

(b) Cash on hand 8,085 6,616

Total (A) 4,08,29,193 6,78,93,587

(B) Other balances with banks

Term deposits with original maturity of less than three months 4,03,60,392 36,04,36,985

Total (B) 4,03,60,392 36,04,36,985

Total (A+B) 8,11,89,585 42,83,30,572

Note 15: Bank Balances other than aboveAmount in Rs.


As at 31.03.2017

Other Balances with banks

Term Deposits with original maturity of more than three months but less than 12 months

- 6,00,00,000

Term deposits held as margin money 16,19,96,375 7,04,21,495

Total 16,19,96,375 13,04,21,495



As at 31.03.2017

Security Deposit 90,000 90,000

Total 90,000 90,000

Note 17: Others Amount in Rs.


As at 31.03.2017

Due from related parties 1,43,240 1,16,500

Due from others 61,74,759 4,30,416

Interest accrued on deposits 33,52,531 37,39,439

Total 96,70,530 42,86,355


90

Note 18: Current tax asset (net)Amount in Rs.


As at 31.03.2017

Income tax (Net of provisions) 78,93,925 4,51,84,155Total 78,93,925 4,51,84,155

Note 19: Other current assetsAmount in Rs.


As at 31.03.2017

Advances other than capital advances:

(i) Advances to Suppliers 3,00,000 28,04,272

(ii) Balances with government authourities

Goods and Service Tax Input 60,92,690 -

Service Tax 16,87,404 24,03,134

VAT 74,58,337 1,26,81,197

Prepaid expenses 1,98,96,814 25,60,023

Other Receivables - 4,07,221

Total 3,54,35,245 2,08,55,847

Note 20: Equity Share Capital Authourised, Issued, Subscribed and Paid up Share Capital

Amount in Rs.

As at 31.03.2018

As at 31.03.2017

Authorised:

425000000 Equity Shares of Rs.10 each 4,25,00,00,000 4,25,00,00,000

Issued:

100000000 Equity Shares of Rs.10 each fully paid up 1,00,00,00,000 1,00,00,00,000

Subscribed and fully Paid up capital:

50001200 Equity Shares of Rs.10 each fully paid up 50,00,12,000 50,00,12,000

50,00,12,000 50,00,12,000

a) Reconciliation of equity shares outstanding at the beginning and at the end of year:

Fully paid Equity sharesAs at 31.03.2018 As at 31.03.2017

No. of Shares Amount in Rs. No. of Shares Amount in Rs.

At the beginning of the year 5,00,01,200 50,00,12,000 5,00,01,200 50,00,12,000

Add: Issued during the year - - - -

At the end of the year 5,00,01,200 50,00,12,000 5,00,01,200 50,00,12,000


91


b) Terms / rights attached to equity shares:

(i) The Company has issued only one class of equity shares and no securities have been issued with the right / option to convert the same into equity shares at a later date.

(ii) No shares have been reserved for issue under options and contracts / commitments for the sale of shares / disinvestment.

(iii) The shares issued and subscribed carry equal rights and voting power.

(iv) All the shares issued and subscribed carry equal right of dividend declared by the Company and no restrictions are attached to any specific shareholder.

c) Details of Shareholders holding more than 5% of equity shares in the Company:

Name of the ShareholdersAs at 31.03.2018 As at 31.03.2017

No. of Equity Shares

Percentage of Holding



Fully paid Equity Shares of Rs.10 each held by:

Infrastructure Leasing and Financial Services Limited (Associate)

2,50,00,000 50% 2,50,00,000 50%

Oil and Natural Gas Corporation Limited (Associate) 1,30,00,000 26% 1,30,00,000 26%

Karnataka Industrial Area Development Board (Associate)

1,15,00,000 23% 1,15,00,000 23%

Note 21: Other EquityAmount in Rs.

Particulars Reserves and Surplus

Retained Earnings Total

Balance at the beginning of the reporting period April 01, 2017 - (A) 17,15,06,388 17,15,06,388

Additions during the year:

Profit / (Loss) for the year 3,65,88,364 3,65,88,364

Items of OCI for the year, net of taxes:

Remeasurment benefit of defined benefit plans 1,26,284 1,26,284

Total Comprehensive Income for the year 2017-18 - (B) 3,67,14,648 3,67,14,648

Reductions during the year:

Dividends - -

Income tax on dividends - -

Transfer to general reserves - -

Any other change - - -

Total (C) - -

Balance at the end of the reporting period March 31, 2018 (A+B-C) 20,82,21,036 20,82,21,036


92

Note 22: Borrowings Amount in Rs.

Particulars Maturity date Terms of repayment Effective

interest rateAs at

31.03.2018As at

31.03.2017

Secured

Rupee Term Loans March 2032

Sixty two unequal quarterly installments

8.24% (9.35%)*

5,72,80,71,409 5,79,10,50,643

Total non-current borrowings 5,72,80,71,409 5,79,10,50,643

Less: Amount included under the head "Other financial liabilities" - 'Current maturities of long-term debt' (Refer note 28)

(9,88,65,000) (6,61,05,000)

Total 5,62,92,06,409 5,72,49,45,643

* Indicates the EIR as at 31.03.2017

(i) Term loan from banks including current maturities is secured by mortagage of the land and structure / lease hold rights, of the entire immovable assets of the borrower both present and future, excluding land & structure pertaining to the rehabiltation and resettlement of the colony and lands for which lease agreements with tenants of the SEZ project already in place. First charge on the entire assets of the borrower present and future both movable and immovable. First charge on all revenues/receivables accuring to the project.

(ii) There has been no default in payment of principal and interest during the year.

(iii) During the year the company has received sanction from Corporation bank, Mangaluru for Rs.121 Crore and has executed the term loan agreement on March 15, 2018. The modification charge has been created with the same conditions of that of Lead bank (State Bank of India). However, the company has not availed the said loan before March 31, 2018.

Note 23: Other financial liabilitiesAmount in Rs.


As at 31.03.2017

Trade Deposits 29,69,062 1,78,94,407

Total 29,69,062 1,78,94,407

Note 24: Provisions Amount in Rs.


As at 31.03.2017

Provision for employee benefits:

Provision for Gratuity 82,75,655 67,42,116

Provision for Compensated absences 67,23,793 64,82,325

Total 1,49,99,448 1,32,24,441


93


Note 25: Deferred tax

The major components of deferred tax (liabilities) / assets arising on account of timing differences are as

follows:

As at 31st March, 2018

Amount in Rs.

ParticularsBalance Sheet Profit and

Loss OCI Balance Sheet

01.04.2017 2017-18 2017-18 31.03.2018

Difference between written down value/capital work in progress of fixed assets (including Investment Property) as per the books of accounts and Income Tax Act, 1961

32,65,25,458 15,08,33,768 - 47,73,59,226

Difference between written down value of Intangible assets as per the books of accounts and Income Tax Act, 1961

2,34,10,122 65,37,416 - 2,99,47,538

Expense claimed for tax purposes on payment basis - - - -

Provision for expense allowed for tax purpose on payment basis

- (89,53,332) - (89,53,332)

Remeasurment benefit of the defined benefit plans through OCI

- - 66,834 66,834

DTA on non refundable one time user fee considered as income for Income Tax, while the same is amortized over the period of agreement under IND AS

(9,52,88,451) (9,52,88,451)

Difference in carrying value and tax base of unwinding of security deposit

- 66,233 - 66,233

Difference in carrying value and tax base of term loan measuerd at amortized cost

50,02,510 (4,81,464) - 45,21,046

Deferred tax expense / (asset) - (i) 5,27,14,169 66,834

Deferred tax Asset (MAT entitlement) not recognised in earlier years (ii)

(5,88,53,565) -

Deferred tax expense / (asset) - [(i)-(ii)] (61,39,396)

Net Deferred tax liabilities (Total A) 35,49,38,091 40,77,19,095

Movement in MAT Credit Entitlement:Amount in Rs.

Details As at 31.03.2018

MAT Credit Entitlement (5,88,53,565)

MAT Credit Utilized 5,85,05,560

Balance MAT credit available (Total B) (3,48,005)

Total deferred tax liability (Total A + Total B) 40,73,71,090


94

Note 26: Other non Current Liabilities Amount in Rs.


As at 31.03.2017

Advances from customers 9,32,65,34,704 8,29,08,56,844

Less: Amount included under the head 'Other Current liabilities' - Advances from customers (refer note 29)

(20,76,14,728) (13,74,80,952)

Total (A) 9,11,89,19,976 8,15,33,75,892

Government grant (refer note 43) 18,72,75,000 15,84,00,000

Deferred income 1,43,15,164 -

Less: Amount included the head 'Other Current Liabilities' - 'Deferred income' (refer note 29)

(38,63,788) -

Total (B) 19,77,26,376 15,84,00,000

Total (A+B) 9,31,66,46,351 8,31,17,75,892

Note 27: Trade PayablesAmount in Rs.


As at 31.03.2017

Outstanding dues to Micro and Small Enterprises - -

Outstanding dues of creditors other than Micro and Small Enterprises 19,59,80,054 13,85,76,183

Total 19,59,80,054 13,85,76,183

The classification of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the Company.

Disclosure requirement as required under Micro, Small, & Medium Enterprises Development Act, 2006 is as follows:

Particulars 31-Mar-18 31-Mar-17

a. The principal amount and the interest due thereon remaining unpaid to any supplier as at the end of accounting year.

Nil Nil

b. The amount of interest paid by the buyer under MSMED Act, 2006 along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year.

Nil Nil

c. The amount of interest due and payable for the period (where the principal has been paid but interest under the MSMED Act, 2006 not paid).

Nil Nil

d. The amount of interest accrued and remaining unpaid at the end of the accounting year and

Nil Nil

e. The amount of further interest due and payable even in the succeeding year, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under Section 23.

Nil Nil


95


Note 28: Other Financial Liabilities

Amount in Rs.


As at 31.03.2017

Current maturity of long term debt (refer note 22) 9,88,65,000 6,61,05,000

Retention monies relating to capital expenditure / projects 14,94,26,316 22,92,19,304

Security Deposits 4,28,46,339 4,00,43,530

Earnest Money Deposit 28,34,750 48,92,050

Payable towards capital / project related expenditure / works 53,25,60,780 48,15,40,792

Payable to employees 84,30,000 35,16,782

Total 83,49,63,185 82,53,17,458

Payable to contractors towards project related EMD accepted by company and retention monies to contractors, are non-interest bearing.

Note 29: Other Current LiabiltiesAmount in Rs.


As at 31.03.2017

Advances from customers (refer note 26) 20,76,14,728 13,74,80,952

Deferred income (refer note 26) 38,63,788 -

Others:

Payable towards WCT under VAT - 3,92,349

Payable towards Service tax - 52,26,102

Payable towards Goods & Service tax 3,50,00,361 -

Payable towards TDS under Income Tax 60,07,296 58,54,873

Payable towards Providend fund, Profession Tax and ESIC 1,11,157 96,440

Total 25,25,97,331 14,90,50,716

Note 30: ProvisionsAmount in Rs.


As at 31.03.2017

Provision for Employee Benefits:



Provision towards Rehabilitation & Resettlement cost (refer note 4 (iii)) 7,84,42,272 8,63,75,001

Total 8,06,90,407 8,75,57,511


96

Movement for Rehabilitation & Resettlement ProvisionAmount in Rs.


As at 31.03.2017

Opening provision 8,63,75,001 12,21,94,255

Addition during the year 86,87,000 41,19,677

Utilized during the year 1,66,19,729 3,99,38,931

Closing provision 7,84,42,272 8,63,75,001

Note 31: Revenue from OperationsAmount in Rs.


Sale of Products

River water and Tertiary treated water 76,08,14,303 63,55,07,439

Power 29,72,46,579 17,12,64,873

Sale of Services

Land Lease Premium 13,07,19,223 11,43,31,364

Land Lease Rental 4,63,73,020 5,85,25,198

Operation and Maintenance Charges 40,59,51,895 29,31,74,967

Other Operating revenues

Usuage charges towards infrastructure facilities 10,12,00,333 1,24,32,330

Total 1,74,23,05,353 1,28,52,36,171

Note 32: Other IncomeAmount in Rs.


Interest Income:

(i) On financial assets measured at amoritzed cost 1,32,17,074 1,97,89,609

(ii) On security deposits measured at amortized cost 8,11,781 -

Dividends from mutual fund investments measure at FVTPL 1,40,70,240 96,20,005

Government grant 8,25,000 -

Other Non operating income 24,86,267 3,26,01,314

Total 3,14,10,362 6,20,10,928

Note 33: Cost of Purchased PowerAmount in Rs.


Purchase of Power 25,54,54,650 10,53,76,965

Total 25,54,54,650 10,53,76,965


97


Note 34: Employee Benefit ExpenseAmount in Rs.


Salaries and wages 7,00,01,636 5,70,54,345

Contribution to provident and other funds 60,29,473 60,76,105

Staff welfare expenses 49,80,158 37,82,752

Total 8,10,11,267 6,69,13,202

Note 35: Finance CostsAmount in Rs.


Interest on financial liabilities measured at amortized cost

- Interest on bank borrowings 49,84,20,778 49,27,82,572

- Interest on security deposit 26,09,091 28,97,498

Interest on security deposits measured at fair value 6,20,401 -

Other borrowing cost 73,78,661 3,78,00,261

Total 50,90,28,931 53,34,80,331

Note 36: Depreciation and Amortisation ExpenseAmount in Rs.


Depreciation of Property, plant and equipment (Refer Note 3) 40,79,67,947 28,64,93,711

Amortisation of Intangible assets (Refer Note 6) 66,35,024 68,37,119

Total 41,46,02,971 29,33,30,830

Note 37: Other ExpensesAmount in Rs.


Rent 1,73,20,809 44,38,011

Rates & taxes 41,14,498 2,27,750

Repair and Maintenance 23,76,54,401 15,70,36,808

Insurance 51,07,986 56,43,832

Advertising and publicity 25,58,249 21,19,948

Travelling expenses 1,28,27,989 1,52,21,010

Professional & consultancy charges 1,09,33,747 3,84,83,125

Allowance for doubtful debts 7,09,24,536 1,31,37,275

Payment to auditors (Refer Note 37(a)) 6,97,713 5,43,708

Corporate social responsibility (Refer Note 37(b)) 32,11,549 25,63,225

Miscellaneous Expenses 3,90,81,771 1,73,07,346

Total 40,44,33,248 25,67,22,037


98

Note 37(a): Payment to AuditorsAmount in Rs.


Audit fee 3,75,000 3,25,000

Tax Audit fee 62,500 62,500

Certification fees 1,87,500 1,25,000

Re-imbursement of expenses 72,713 31,208

Total payment to auditors 6,97,713 5,43,708

Note 37(b): Corporate Social Responsibility ExpensesAmount in Rs.

Year 2017-18 Year 2016-17

A. Gross amount required to be spent by the Company 18,38,000 24,14,000

B. Amount spent during the year on:

i. Construction / Acquisition of any assets 25,40,479 18,52,585

ii. Purposes other than (i) above 6,71,070 7,10,640

32,11,549 25,63,225

Amount spent against current year budget 19,02,873 17,40,635

Amount spent against previous years shortfall:

FY 2015-16 6,35,311 8,22,590

FY 2016-17 6,73,365

C. Total 32,11,549 25,63,225

Note 38: Income Tax ExpenseA. The major components of income tax expense for the year are as under:

(i) Income tax recognised / reported in the Statement of Profit and Loss.

Amount in Rs.

31-Mar-18 31-Mar-17

Current tax:

Current tax on profits for the year 7,87,35,681 1,99,20,926

Adjustments for current tax of prior periods - 15,267

Total current tax expense 7,87,35,681 1,99,36,193

Deferred tax:

(i) Increase / (Decrease) in deferred tax 5,27,14,169 13,13,46,605

(ii) Deferred tax Asset (MAT entitlement) not recognised in earlier years (5,88,53,565)

Total deferred tax expense / (benefit) (61,39,396) 13,13,46,605

Income tax expense 7,25,96,285 15,12,82,798

Income tax expense is attributable to:

Profit from continuing operations 7,25,96,285 15,12,82,798


99


B. Reconciliation of tax expense and the accounting profit multiplied by Indian tax rate for the year is as under:

Amount in Rs.


Profit before tax 10,91,84,648 9,14,23,734

Income tax expense calcualted at Company's domestic tax rate at 34.608% (previous year 33.063%)

3,77,86,623 3,02,27,429

Tax Effect of:

- Deduction u/s.80IAB (41,28,59,061) (17,68,22,928)

- Tax effect of unabsorbed depreciation (7,19,24,827)

- Tax effect of non-deductable expenses 1,18,76,843 4,01,64,383

- Effect of income exempted from tax (68,74,049) (31,80,662)

- Effect of receipts which is offered for tax 58,89,40,424 25,35,41,678

- Effect of tax under MAT - 72,41,788

- MAT Credit (5,88,53,565) -

- Others (1,54,96,103) 95,843

- Total 7,25,96,285 15,12,67,531

- Adjustments for current tax of prior periods - 15,267

- Tax expense as per Statement of Profit and Loss 7,25,96,285 15,12,82,798

Note: The tax rate used for reconciliation above is the corporate tax rate of 34.608% payable by Corporate

entities in India on taxable profits under Indian tax law.

Note 39: Lease of Land

(i) Finance Lease:

The Company has obtained on a lease-cum-sale basis from Karnataka Industrial Area Development Board

(KIABD) vide lease-cum-sale agreement dated 28.12.2010. The lease is for a period of 50 years. The lease

agreement with KIADB stipulates various conditions related to lease, including in relation to the manner in

which the Company will obtain freehold title of land. The Company is reasonably certain to obtain freehold

title, since the terms and conditions for conversion to freehold land has been fulfilled and have already

applied to KIADB for absolute sale deed in favour of the Company. Since, reasonable certainity exists that

ownership of the asset - land the economic ownership of the land ab initio would eventually pass on to the

Company the land is accounted as a tangible asset of the Company e.g. Leasehold land convertible into

freehold. Thus in substantive terms, the Company has acquired a tangible asset - only in legal terms the

conversion into freehold status is pending.

The Company paid leasehold premium upfront and same has been capitalized.


100

The details of land lease period and execution of lease cum sale agreement is as under:

Area Details - in Acres

Total Area as on

31.03.2018

Agreement date

Lease Commence-ment date

Area Registered

as on 31.03.2018

Land surrendered

to KIADB

Balance not registered

as on 31.03.2018

Total Area as on

31.03.2017

Area Registered

as on 31.03.2017

Balance Not registered

as on 31.03.2017

(after surrender to KIADB)

1972.228.12.2010* 27.01.2010

1543.21 428.99 1985.15 1543.21 441.9429.06.2011# 27.12.2010

2.47 07.12.2011 28.10.2011 2.47 - 2.47 2.47

86.5242 03.11.2014 25.07.2012 86.5242 - 86.5242 86.5242

274.36 - 251.23 23.13 274.36 23.13

9.7667 9.7667 7.35 7.35

2345.32 1632.20 251.23 461.89 2355.85 1632.20 ^472.42

* For 1533.22 acres

# For 9.99 acres

^ Includes 152.1531 Acres allocated to project displaced families

(ii) Operating Lease

The Company has sub leased land inside MSEZ (lease-cum-sale land acquired from KIADB) on operating lease to

various units. The sub-lease are long term in nature and the period of sub-lease with the units is co-terminous

with that of the lease period entered into by the company with KIADB i.e.until 26th January 2060. The sub-lease

are non-cancellable and does not include contingent rent. The subleases are renewable for a further period on

substantial terms as specified in the lease agreements.

The total future minimum lease premiums / rentals receivable as at March 31, 2018 (based on the agreements

concluded with the units) is as under:

Amount in Rs.

As at 31.03.2018

As at 31.03.2017

Not later than one year 65,80,29,474 37,41,17,157

Later than one year and not later than five years 24,66,91,727 39,86,32,177

Later than five years 2,10,48,29,079 1,93,09,34,623


101


Note 40 (A): Category-wise Classification of Financial instrumentsAmount in Rs.

Financial assets measured at fair value through profit or loss (FVTPL)

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

Investments in quoted mutual funds

12 - - 54,86,69,727 18,27,24,487

- - 54,86,69,727 18,27,24,487

Amount in Rs.

Financial assets measured at fair value through other comprehensive income (FVTOCI)

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

Investment in unquoted equity shares (*)

7 8,50,000 8,50,000 - -

8,50,000 8,50,000 - -

Amount in Rs.

Financial assets measured at amortised cost

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

Trade Receivables 8, 13 50,00,000 21,98,27,434 1,69,78,86,616 51,80,80,513

Cash and cash equivalents 14 - - 8,11,89,585 42,83,30,572


15 - - - 6,00,00,000

Term deposits with original maturity of more than 12 months

10 25,000 25,000 - -

Term deposits held as margin money

15 - - 16,19,96,375 7,04,21,495

Security deposit 9, 16 5,20,68,796 5,86,84,895 90,000 90,000

Other Receivables 17 - - 96,70,530 42,86,355

5,70,93,796 27,85,37,329 1,95,08,33,107 1,08,12,08,935


102

Financial liabilities measured at fair value through profit or loss

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

- - - -

Amount in Rs.


measured at fair value

through amortized cost

Refer

Note

Non-Current Current

As at

31.03.2018

As at

31.03.2017

As at

31.03.2018

As at

31.03.2017

Term loan from bank 22 5,62,92,06,409 5,72,49,45,643 9,88,65,000 6,61,05,000

Trade deposits 23 29,69,062 1,78,94,407 - -

Trade payables 27 - - 19,59,80,054 13,85,76,183

Retention monies relating to

capital expenditure / projects

28 - - 14,94,26,316 22,92,19,304

Security Deposits 28 - - 4,28,46,339 4,00,43,530

Payable to contractors

towards project related

Earnest Money Deposit

28 - - 28,34,750 48,92,050

Payable towards capital /

project related expenditure/

works

28 - - 53,25,60,780 48,15,40,792

Payable to employees 28 - - 84,30,000 35,16,782

5,63,21,75,471 5,74,28,40,050 1,03,09,43,239 96,38,93,641

(*) Investments in the equity shares represents the investment is subsidiary companies and the shares are not held

for trading. The Company has chosen to measure these investments in equity instruments at FVTOCI irrevocably as

the management believes that presenting fair value gains and losses relating to these investments is the Statement

of Profit and Loss may not be indicative of the performance of the Company.


103


Note 40 (B): Fair value Measurments

(i) The following table provides the fair value measurment hirearchy of the Company's financial assets and

liabilities:


Amount in Rs.

Financial assets Refer Note

Fair value as at 31.03.2018

Fair Value hierarchy

Quoted prices in active market

(Level 1)

Significant observable

inputs (Level 2)

Significant unobservable

inputs (Level 3)



12 54,86,69,727 54,86,69,727


Investment in unquoted equity shares

7 8,50,000 8,50,000

As at 31st March, 2017 Amount in Rs.





(Level 1)


inputs (Level 2)


inputs (Level 3)



12 18,27,24,487 18,27,24,487



7 8,50,000 8,50,000

(ii) Valuation technique used to determine fair value

Financial instruments measured at fair value

The valuation technique used to value financial instruments at fair value is based on the quoted market prices

of mutual funds recognised at their closing NAV per unit.


104

Note 40 (C): Financial Risk Management - Objectives and Policies

The Company's financial liabilities comprises mainly of viz., term loan borrowings, trade payables and other payables. The Company's financial assets comprises mainly of cash and cash equivalents, trade receivables, investments in mutual funds and other receivables.

The Company has financial risk exposure in the form of viz., market risk, credit risk and liquidity risk. The Risk Management Committee under the Board of Directors oversees the risk to which the Company is exposed and operates.

The present disclosures made by the Company summarizes the exposure to the financial risks.

1) Market Risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market price comprises three types of risk: currency risk, interest rate risk and other price risk. The financial instruments affected by market risk includes rupee term loan and loans & advance.

a) Interest Rate Risk exposure

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has availed significant rupee term loans at floating (reset every year) interest rates from State Bank of India, New Delhi. The interest rate is at 0.25% (spread) plus MCLR rate of SBI and the interest rate is reset once every year, as per the loan facility agreement. The Company has not entered into any of the interest rate swaps and hence, the Company is exposed to interest rate risk.

The exposure of the company's borrowing to interest rate changes at the end of the reporting period are as follows:

31-Mar-18 31-Mar-17

Variable rate borrowings 5,74,11,35,000 5,80,72,40,000

Fixed rate borrowings - -

5,74,11,35,000 5,80,72,40,000

As at the end of the reporting period, the company had the following variable rate borrowings outstanding

31-Mar-18 31-Mar-17

Weighted average interest

rate

Balance % of total loans


rate

Balance % of total loans

Rupee term loan

8.97% 5,74,11,35,000 100% Rupee term loan

10.32% 5,80,72,40,000 100%

Exposure to cash flow interest rate risk

5,74,11,35,000 Exposure to cash flow interest rate risk

5,80,72,40,000


105


Interest Rate Senstivity analysis

The Company considering the economic enviornment in which it operates has determined the interest rate sensitivity analysis (interest exposure) at the end of the reporting period. The interest rate for the Company are floating rates and hence, the analysis is prepared assuming the amount of the borrowings outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point +/- fluctuation in the interest rate is used for disclosing the sensitivity analysis.

Amount in Rs. Crores

Impact on Profit before tax

31-Mar-18 31-Mar-17

Interest rates - increase by 50 basis points 2.89 2.93

Interest rates - decrease by 50 basis points (2.89) (2.93)

The interest rate senstivity analysis is done holding on the assumption that all other variables remains constant. The increase / decrease in interest expense is cheifly attributable to the Company's exposure to interest rates on its variable rate of borrowigs.

b) Foreign currency risk exposure

Foreing currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreing exchange rates. The Company undertakes transactions in Indian Rupees and its borrowings/ loans payable & trade receivables are also denominated in Indian Rupees and hence, there is no exposure of the Company's operations to foreign exchange rate fluctuations does not arise.

Foreign currency rate senstivity analysis Since, there is no foreign currency risk, senstivity analysis for the same does not arise

c) Other price risk

Other price risk is the risk that the fair value of a financial instruments will fluctutate due to changes in market traded prices. The Companys investment in liquid cash divident reinvestment plan the NAV is fixed and hence, there is no risk price movement arising to the Company. The Company's equity investment in its subsidiary is not held for trading and hence, not subjected to price movement and thus, there is no risk.

2) Credit Risk

The Credit risk refers to risk that a counterparty will default on its contratual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investment in mutual funds, Bank balances and other receivables.

The Company primarily deals with the units/consumers operating inside the Mangalore Special Economic Zone (MSEZ). The units/consumers are the industries who have invested in MSEZ for setting up their industry. The Company enters into MOU / Lease deed for lease of land and receives on-time lease premium (as per agreed milestones) and also collects annual lease rentals. The Company makes sale of products (water; power) and supply of services to units / consumers are through pre-determined contracts and agreed rates. In so far as supply of power is concerned the Company charges tariff based on the approved tariff by regulatory commission. The Company's exposure are continuously monitored and the aggregate value of transactions is reasonably spread


106

amongst the units. Further, the Company has balance leaseable land area of 288 Acres (out of 1075 Acres of leaseable land) as on 31st March, 2018. The Company upon entering into MOU / lease agreement with the prospective units / consumer would receive one-time lease premium and annual rentals and concurrently, would also receive steady operating cash flows through sale of products and supply of services.

The credit risk arising from the exposure of investing in mutual funds and bank balances is limited and there is no collateral held against these because the counterparties are the recognised financial institutions and public sector banks, which are creditworthy.

The credit period in majority of the trade receivables range from 7 days-15 days and average credit period is less than 30 days. Credit risk arising from trade receivables is managed in accordance with the Company's establised policy, procedures and control relating to customer credit risk management. The concentration of the credit risk is limited due to fact that the area of operation of the Company is confined to one geography (MSEZ) and the number of units / consumers are also limited, wherein again the credit risk mitigated through pre-existing contract obligations.

For trade receivables, as a practical expedient, the Company computes the credit loss allowance if there is life-time expected credit losses.

Movement in expected credit loss allowance on trade receivables

Amount in Rs.

Particulars 31.03.2018 31.03.2017

Balance at the beginning of the year 11,04,66,153 11,24,49,250

Loss allowance measured at life time expected credit losses - -

Impairment allowance 7,09,24,537 -

Impairment written-off - (1,51,20,371)

Fair value losses provided - 1,31,37,275

Balance at the end of the year 18,13,90,690 11,04,66,153

3) Liquidity risk

Liquidity risk is the risk that the Compnay will encounter difficulty in meeting obligations associated with financial

liabilities that are settled by delivering cash or another financial asset. Liquity risk may result from an inability to

sell a financial asset quickly to meet obligations when due. The Company's exposure to liquity risk arises primarily

from mismatches of maturities of financial assets and liabilities.

The Company manages the liquidty risk by (i) maintaining adequate and sufficient cash and cash equivalents

including investments in mutual funds (ii) making avaliable the funds from realising timely maturities of financial

assets to meet the obligations when due. The management monitors rolling forecast of the Companys liquity

position and cash and cash equivalents on the basis of expected cash flows. Also, the Company manages the

liquidity risk by projecting cash flows considering the level of liquid assets necessary to meet the obligations by

matching the maturity profiles of financial assets and financial liablities and monitoring balance sheet liquidity

ratios. Further, the liquidity risk management involves matching the maturity profiles of financial assets and

financial liabilities.


107


(i) Financial Arrangements

The Company has access to the following undrawn borrowing facilities at the end of the reporting period:

Amount in Rs.

31-Mar-18 31-Mar-17

Expiring within one year 1,21,00,00,000 -

Expiring beyond one year - 1,00,00,000

1,21,00,00,000 1,00,00,000

The company makes an annual / long term financial plan so as to ensure there are no maturity mismatches in

settlement of liabilities

Note 40(D): Capital Management

The Company's objective when managing capital are to:

a) Safeguard the Company's ability to continue as a going concern, so that they can continue to provide returns for

shareholders and benefits for other stakeholders, and

b) Maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the company may vary the distribution of dividends to shareholders,

return capital to shareholders, issue new shares or sell assets to reduce debt.

As at 31st March, 2018, the Company has only one class of equity share and rupee term loan. Consequent to such

capital structure, there are no externally imposed capital requirements.

The capital structure of the Company consists of debt (borrowings as detailed in notes 22 and 28) and total equity

including advances received from units towards lease of land and use of infrastructure facilities of the Company and

monitors capital, based on this capital structure's gearing ratio.

The gearing ratio at the end of the reporting period is computed as follows:

Amount in Rs.

As at 31.03.2018 As at 31.03.2017

i) Debt 5,72,80,71,409 5,79,10,50,643

ii) Equity share capital 50,00,12,000 50,00,12,000

iii) Other equity 20,82,21,036 17,15,06,388

iv) One time non-refundable amounts from customers 9,32,65,34,704 8,29,08,56,844

v) Total equity [(ii)+(iii)+(iv)] 10,03,47,67,740 8,96,23,75,232

vii) Net Debt to equity ratio (times) 0.6 0.6


108

Note 41: Related Party Disclosures

A Name of related parties and description of relationship:

i Parent entities

Name of the Company Type Place of incorporation

Ownership interest

31-Mar-18 31-Mar-17

Infrastructure Leasing and Financing Services Limited (IL&FS) Associate India 50% 50%

Oil and Natural Gas Corporation Limited (ONGC) Associate India 26% 26%

Karnataka Indutrial Area Development Board (KIADB) Associate India 23% 23%

ii Subsidiaries: (where control exists)

Name of the Company Type Place of Incorporation

Ownership interest

31-Mar-18 31-Mar-17

Mangalore STP Limited Subsidiary India 70% 70%

MSEZ Power Limited Wholly owned subsidiary

India 100% 100%

B Key Management Personnel

(i)

Name Designation

Shri Shashi Shanker Chairman

Shri Paritosh Kumar Gupta Managing Director

Shri Srinivas Santhayya Kamath Independent Director

Shri Inturi Srinivas Nagesh Prasad Independent Director

Shri Saibal Kumar De Nominee Director of IL&FS

Shri Kumar Hariharan Nominee Director of ONGC

Shri Akshaya Kumar Sahoo Nominee Director of ONGC

Smt. C. Vathika Kamath Nominee Director of KCCI

(ii) Shri Velnati Suryanarayana Chief Operating Officer

(iii) Shri Gouranga Charan Swain Chief Financial Officer

(iv) Shri Phani Bhushan Company Secretary


109


C List of related parties

Name of the Company Relationship

ONGC Mangalore Petrochemicals Limited ONGC - Ultimate holding company

Mangalore Refineries and Petrochemicals Limited Subsidiary of ONGC

IIDC Limited Subsidiary of IL&FS

IL&FS Energy Development Company Limited Subsidiary of IL&FS

Karnataka Indutrial Area Development Board A statutory body of Government of Karnataka

D Details of transactions:

(i) Transactions with related parties

Amount in Rs.

Name of related Party Nature of TransactionFor the year

ended March 31, 2018

For the year ended March

31, 2017

ONGC Mangalore Petrochemicals Limited

Supply of services - Corridor ROW - 7,57,00,000

Supply of services - Annual lease rental 2,33,96,214 2,33,96,214

Sale of products 27,83,82,460 13,09,87,014

Supply of services 10,04,55,932 9,05,85,841

Interest payable on security deposit (Power) 9,70,092 11,93,500

Mangalore Refinery and Petrochemicals Limited

Supply of services - 'By pass road' charges - 52,27,000

Sale of products 25,41,55,693 26,07,68,811



Infrastructure Leasing & Financial Services Limited

Service received - Deputation of MD 33,42,473 56,16,429

Service received - Renting 2,072 11,04,071

Karnataka Indutrial Area Development Board

Acquisition of land / R&R colony - 1,12,78,050

Services received - Annual Lease rent 5,17,621 5,89,921

Services received - ROW charges - 23,68,700

Towards acquisition of land 1,76,48,000 73,61,550

IIDC LimitedService received - Deputation of Advisor - 16,50,000

Supply of services - Rent 1,36,422 -

IL&FS Energy Development Company Limited Service received - Consultancy - 3,00,000

Mangalore STP Limited Supply of goods 3,22,76,403 2,54,62,778

MSEZ Power Limited Supply of services 26,740 3,200


110

(ii) Outstanding balances with related parties

Amount in Rs.




31, 2017

a. Amount payable:

Infrastructure Leasing and Financing Services Limited (IL&FS) Trade payable 4,50,000 5,51,722


Towards acquisition of land 35,71,91,858 38,17,71,173

Trade payable - 37,696

ONGC Mangalore Petrochemicals Limited Other payable 1,11,01,567 10,74,150

Mangalore STP Limited Supply of goods 25,35,530 11,29,104

Mangalore Refinery and Petrochemicals Limited Other payable 42,87,970 -

b. Amount Receivable:


Other receivable 1,30,773 1,30,773

ONGC Mangalore Petrochemicals LimitedOther receivable 24,084 15,48,246

Trade Receivable 18,46,05,908 9,05,73,638


Other receivable 2,48,80,606 2,99,82,606


MSEZ Power Ltd Other receivable 1,43,240 1,16,500

c. Loans and other assets (Debit balances)


Security deposit -Lease of land

11,60,000 11,60,000

Capital advances towards land

3,14,29,250 3,41,61,952

d. Advances & Deposits (Credit balances)


Advance towards Corridor - 97,57,00,000

Security deposit - Power 1,54,00,000 1,54,00,000

Security deposit - River water 31,27,164 31,27,164



Security deposit - Marine Outfall

6,22,209 6,22,209

Security deposit - TTP Water 45,72,668 45,72,668

Security deposit - Hire of Machinery

13,296 13,296

Advance towards Corridor 97,57,33,333 97,57,33,333


111


(iii) Provisions for doubtful debts related to amount of outstanding balances

Amount in Rs.

Name of the related party Nature of Transaction As at 31.03.2018

As at 31.03.2017

ONGC Mangalore Petrochemicals Limited Supply of services 1,55,06,117 2,65,25,680

Mangalore Refinery and Petrochemicals Limited Supply of services 2,57,27,980 -

Total 4,12,34,097 2,65,25,680

(iv) Expense recognised during the period in respect of bad or doubtful debts

Amount in Rs.


As at 31.03.2017

ONGC Mangalore Petrochemicals Limited Supply of services 2,85,164 -

Mangalore Refinery and Petrochemicals Limited Supply of services - 85,36,542

Total 2,85,164 85,36,542

(v) Compensation to Key management personnel:

(a) Chief opertaing officer

Amount in Rs.

ParticularsFor the year



31, 2017

Short-term employee benefits 57,03,576 32,76,288

Post-employment benefits (gratuity) & long-term benefit (Compensated absences)

3,78,771 -

Contribution to providend fund 21,600 10,800

Total 61,03,947 32,87,088

(b) Chief financial officer

Amount in Rs.




31, 2017



13,27,707 10,42,831


Total 74,98,359 58,37,677


112

(c) Company Secretary

Amount in Rs.




31, 2017



2,22,972 1,04,125


Total 23,46,091 17,40,156

(d) Independent directors

Amount in Rs.




31, 2017

Sitting fees 3,75,500 6,53,250

Note 42: Employee Benefits

1 Post-employment benefits:

Breif Description: A general description of the type of employee benefit plan is as follows:

Defined benefit gratuity plan (Unfunded):

The company has a defined benefit gratuity plan for its employees. It is governed by Payment of Gratuity Act, 1972. Under the said Act employees who have completed five years of service is entitled to gratuity benefits. The level of benefit provided depends on the employees length of service and last drawn salary.

The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using the projected unit credit method (PUCM).

This post-employment plan typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

Investment Risk The present value of the defined benefit liability is calculated using a discount rate which is determined by reference to markek yields at the end of the reporting period on government bonds

Interest rate Risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan's investments.

Longevity Risk The present value of the defined benefit liability is calculated by reference to the bese estimate of the mortality of plan participants both during and after their employment. An increase in the life expentancy of the plan participants will increase the plan's liability.

Salary Risk The present value of the defined benefit liability is calculated by reference to the future salaries of plan participants. As such, an increase in salary of the plan participants will increase the plan's liability.


113


Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Company has to manage payout based on pay as you go basis from own funds.

Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

During the year, the company has changed the benefit scheme in line with Payment of Gratuity Act, 1972 by increasing the monetary ceiling from Rs.10 Lakhs to Rs.20 Lakhs. Change in liability (if any) due to this scheme change is recognied as past service cost.

The most recent actuarial valuation of the plan assets and the present value of defined obligation were carried out as at March 31, 2018.

The principal actuarial assumptions used in determing Gratuity are as follows:

Sl. No. Particulars As at 31st

March 2018As at 31st

March 2017

1 Discount Rate 7.88% 7.26%

2 Annual increase in salary 9% 9%

3 Employee Turnover 5% 5%

The discount rate relates to the benchmark rate available on G.Sec. And is taken as per deal rate as on 31.03.2018. The tenure of the G.Sec. Rate matches with the expected term of the obligation

The following table summarize the components fo the defined benefits expense recognised in the statement of profit

or loss / OCI.

Amount in Rs.


31, 2018


31, 2017

Current Service Cost 10,98,478 8,34,444

Net Interest Cost 5,29,549 3,75,170

Components of defined benefit costs recognised in profit or loss 16,28,027 12,09,614

Re-measurment on the net defined benefit liability:

Actuarial (gains) / losses arising from change in assumptions (1,93,118) 14,41,879

Components of remeasurment recognised in other comprehensive income (1,93,118) 14,41,879

Total 14,34,909 26,51,493

The following table summarize the components fo the defined benefits expense recognised in the Balance sheet

Amount in Rs.


As at 31.03.2017

(Present value of benefit obligation at the end of the Period) (92,09,033) (72,94,062)

Fair Value of plan assets at the end of the period - -

Net (liability) / Asset recognised in the Balance sheet (92,09,033) (72,94,062)


114

Movements in the present value of the defined benefit obligation are as follows

Amount in Rs.


As at 31.03.2017

Present Value of Benefit Obligation at the beginning of the period 72,94,062 46,95,489

Interest Cost 5,29,549 3,75,170


Past Service Cost 8,87,293 -

(Benefit paid Directly by the Employer) (4,07,231) (52,920)

Actuarial (Gains) / Losses on Obligations - Due to change in Demographic Assumptions

- -

Actuarial (Gains) / Losses on Obligations - Due to change in Financial Assumptions

(5,96,920) 13,71,147

Actuarial (Gains) / Losses on Obligations - Due to Experience 4,03,802 70,732

Present Value of Benefit Obligation at the end of the period 92,09,033 72,94,062

Current 9,33,378 5,51,946

Non-Current 82,75,655 64,82,325

Significant acturial assumptions for the determination of the defined obligation are discount rate, expected salary increase and employee turnover. The sentivity analysis below have been determined based on the reasonably possible changes of the respective assumptions occuring at the end of the reporting period, while holding all the other

assumption constant.

Amount in Rs.


31, 2018


31, 2017

Projected benefit Oboigation on Current Assumptions 92,09,033 72,94,062

Discount Rate

- Impact due to increase of 1% (8,45,208) (6,60,236)

- Impact due to decrease of 1% 9,94,188 7,77,817

Salary increase

- Impact due to increase of 1% 7,46,946 5,08,740

- Impact due to decrease of 1% (7,47,513) (4,97,622)

Employee Turnover

- Impact due to increase of 1% (67,338) (25,878)

- Impact due to decrease of 1% 73,191 22,771

Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count. This only signifies the change in the liability if the dfference between assumed and the actual is not following the parameters of the senstivity analysis

Furthermore, in presenting the above senstivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liabiltiy recognised in the balance sheet.


115


2. Other Long term employee benefit

Actual Leave and Sick leave assumptions

Compensated absences - Earned leave eligibility is 25 days per annum and sick leave 12 days per annum. Encashment permitted up to a maximum of 300 days per employee.

The liability towards compensated absences (annual leave and sick leave) for the year ended 31st March, 2018 based on actuarial valuation carried out by using Projected Unit Credit Method resulted in increase in liability by Rs.9,25,661 (Previous year Rs.25,01,110)

Assumptions


MortalityIndian Assured Lives Mortality (2006-08)

Ultimate

Indian Assured Lives Mortality (2006-08)

Ultimate

Retirement Age 60 years 60 years

Attrition rate 5% p.a. 5% p.a.

Salary Escalation Rate 9.00% p.a. 9.00% p.a.

Discount Rate 7.88% p.a. 7.26% p.a.

While is service Encashment rate 5.00% for the next year

5.00% for the next year

Note 43: Government Grants and Government Assistance (a) Government Grants (refer Note 26) The Company has received government grants from Visvesvaraya Trade Promotion Centre (VTPC), a Government

of Karnataka organisation under ASIDE scheme for construction of Common Effluent Treatment Plant (CETP) Rs.4.95 Crore as at March 31, 2018 (Rs.3.96 Crore as at March 31, 2017) and Two lane Flyover near Jokatte, Manglore SEZ (MSEZ) Rs.13.86 Crore as at March 31, 2018 (Rs.11.88 Crore as at March 31, 2017).

(i) Movement in Government Grants (a) CETP

Amount in Rs.


As at 31.03.2017

Opening balance 3,96,00,000 2,97,00,000

Add: Addition during the year 99,00,000 99,00,000

Less: Amortisation during the year 8,25,000 -

Closing Balance 4,86,75,000 3,96,00,000

(b) Two lane Flyover

Amount in Rs.


As at 31.03.2017

Opening balance 11,88,00,000 9,90,00,000

Add: Addition during the year 1,98,00,000 1,98,00,000

Less: Amortisation during the year -

Closing Balance 13,86,00,000 11,88,00,000

The Company has adopted income approach, under which a grant is recognised in profit or loss on a systematic basis over the useful life of assets which have been capitalized.


116

(b) Government Assistance

Company developes special economic zone (SEZ) at Mangalore, Karnataka, India. Accordingly, it is eligible for certian economic benefits such as exemptions from customs duty, Goods and Service tax etc. which are in the nature of government assistance. These benefits are subject to fulfillment of certain obligations by the company.

Note 44: Earnings Per Share (EPS)

Basic EPS amounts are included by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year



For the year ended March 31,

2017

Profit/(Loss) after tax for the year attributable to equity shareholders (Rs.) 3,65,88,364 (5,98,59,063)

Weighted average number of equity shares 5,00,01,200 5,00,01,200

Basic & diluted earnings per share (Rs.) 0.73 (1.20)

Face value per equity share (Rs.) 10.00 10.00

Note 45: The amount recognised in Profit & Loss Account for investment property (refer note 5)

Amount in Rs.


Year 2016-17

Rental Income 17,70,92,243 17,28,56,562

Direct Operating Expenses from property that generate direct rental income 2,15,46,881 2,91,92,713

Direct Operating Expenses from property that did not generate direct rental income

- -

Profit from investment property before depreciation 15,55,45,362 14,36,63,849

Depreciation

Profit from investment property 15,55,45,362 14,36,63,849

Note 46: Contingent Liabilities and Commitments (a) Commitments

Amount in Rs.

Particulars As at 31st March 2018

As at 31st March 2017

Estimated amount of contracts remaining to be executed on capital account and not provided for

i. Towards Plant, Property & Equipment 12,53,50,140 45,97,65,011

ii. Towards Investment Property 6,05,20,913 84,08,468

iii. Towards Intangible Assets - -

Total 18,58,71,053 46,81,73,479

Operating Lease Commitments- The Company has taken office premises under cancellable operating lease and also pays annual lease rentals towards lease of lands for projects. The agreements are renewed on expiry. The Company has paid for year ending March 31, 2018 Rs.1,68,17,538/- (March 31, 2017 Rs.40,03,548)


117

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abut

ting

the

sch

edul

e pr

oper

ties

an

d ot

her

prop

erti

es o

n th

e sa

me

line

com

men

cing

fro

m N

ethr

avat

hi

Rive

r Ba

nk a

t sa

rapa

dy t

o M

SEZ

Indu

stri

al a

rea.

Whi

le c

arry

ing

out

wor

ks n

ear

the

plai

ntiff

s (R

avin

dran

ath

Bajp

e) p

rope

rty,

he

had

cont

ende

d th

at M

SEZL

Off

icia

ls &

Con

trac

tors

hav

e tr

essp

asse

d hi

s pr

oper

ty a

nd d

emol

ishe

d th

e st

one

com

poun

d w

al o

f 7

feet

he

ight

, fo

unda

tion

of

3 fe

et h

eigh

t be

neat

h th

e gr

ound

& 2

fee

t w

ide

to t

he e

xten

t of

abo

ut 5

00 m

eter

s an

d al

so c

ut &

des

troy

ed

abou

t 10

1 v

alua

ble

tree

s an

d la

id p

ipel

ine

bene

ath

the

sche

dule

pr

oper

ties

abo

ut to

ext

ent o

f 500

met

ers.

The

refo

re, R

avin

dran

ath

Bajp

e ha

s fil

ed a

n O

rigi

nal S

uit

befo

re t

he c

ivil

cour

t di

rect

ing

the

defe

ndan

ts jo

intl

y an

d se

vera

lly t

o ap

y a

sum

of

Rs 4

7,90

, 500

/- 4

7,90

,500

Ravi

ndra

nath

Baj

pe i

s ne

ithe

r ab

solu

te

owne

r no

r is

in p

osse

ssio

n of

the

pla

int

sche

dule

Pro

pert

y or

any

par

t th

ereo

f.

The

asse

rtio

n of

the

occ

upan

cy r

ight

co

ntra

dict

s th

e cl

aim

of

ab

solu

te

owne

rshi

p. T

he P

lain

tiff

(Ra

vind

rana

th

Bajp

e) a

nd o

ther

mem

bers

of

his

fam

ily

are

havi

ng li

tiga

tion

in lo

cal c

ourt

wit

h re

gard

to

hi

s cl

aim

s on

oc

cupa

ncy

hold

ing.

The

refo

re,

we

mai

ntai

n th

at

the

Plai

ntif

f is

not

ent

itle

d to

cla

im t

he

alle

ged

loss

or

any

othe

r cl

aim

Peti

tion

er (R

avin

dran

ath

Bajp

e h

as fi

led

this

Spe

cial

Lea

ve P

etit

ion

cont

endi

ng w

heth

er T

he H

igh

Cou

rt &

Ses

sion

Cou

rt q

uash

ed t

he

proc

ess

issu

ed b

y th

e le

arne

d t

rial

cou

rt w

itho

ut a

ppre

ciat

ing

the

alle

gati

ons

in th

e C

ompa

lint a

nd a

lso

as to

whe

ther

the

Hig

h C

ourt

&

Ses

sion

Cou

rt

wer

e ex

pect

ed t

o se

e th

e le

tter

acc

ompa

nyin

g th

e C

ompa

lint

whi

ch w

as

wri

tten

by

Resp

onde

nt N

o. 4

(Et

a Sr

eeni

vasu

lu)

on b

ehal

f of

MSE

ZL t

o th

e Pe

titi

oner

.

To

esta

blis

h a

crim

inal

of

fenc

e,

oral

an

d do

cum

enta

ry e

vide

nce

need

s to

be

furn

ishe

d so

as

to s

ubst

anti

ate

any

of

the

alle

ged

offe

nces

. Th

e le

tter

wri

tten

by

Res

pond

ent

No.

4 m

erel

y re

fers

to

com

pens

ate

the

com

plai

nant

fo

r th

e lo

sses

if a

ny in

curr

ed b

y hi

m, w

hich

nee

d to

be

dete

rmin

ed s

epar

atel

y in

a c

ivil

proc

eedi

ng,

or o

ther

wis

e, a

s de

emed

fi

t by

the

per

sons

res

pons

ible

for

the

da

mag

e. T

he c

ompl

aina

nt c

anno

t alle

ge

a cr

imin

al f

lavo

r to

the

pro

ceed

ings

on

the

basi

s of

the

sai

d le

tter

.


118

3C

heri

an V

arke

y C

onst

ruct

ion

Com

pany

The

peti

tion

er w

as a

war

ded

the

Reac

h IV

con

trac

t fo

rmin

g pa

rt o

f Pi

pelin

e cu

m R

oad

Cor

rido

r on

Aug

ust

2011

. Th

e pe

titi

oner

had

fa

iled

to c

ompl

ete

the

awar

ded

cont

ract

as

per

mile

ston

es. D

ue t

o w

hich

the

con

trac

t w

as e

xten

ded.

The

pet

itio

ner

has

also

sto

pped

th

e w

ork

in a

n au

thou

rize

d m

anne

r on

mul

tipl

e oc

casi

ons.

Due

to

non

-han

ding

ove

r of

the

fro

nt f

or e

xecu

ting

wor

k on

Par

t A

of

the

con

trac

t w

ithi

n th

e or

igin

al c

ontr

act

peri

od,

the

peti

tion

er

was

see

king

inc

reas

e in

rat

es f

or i

tem

s co

vere

d un

der

BOQ

. Th

e co

ntra

ct e

nter

ed b

etw

een

MSE

ZL a

nd p

etit

ione

r bei

ng a

fixe

d pr

ice

cont

ract

did

not

pro

vide

for

esc

lati

on o

f ra

tes

and

com

pens

atio

n ev

ents

to

deal

wit

h in

stan

ces

of d

elay

in h

andi

ng o

ver

fron

ts.T

he

intr

ansi

genc

e on

par

t of

the

pet

itio

ner

lead

to

dela

y in

wor

ks.

Hen

ce,

the

cont

ract

was

ter

min

ated

wit

h im

med

iate

d ef

fect

on

06.1

1.20

13 a

nd a

ll Ba

nk G

uara

ntee

s fu

rnis

hed

by t

he p

etit

ione

r w

as in

voke

d. T

he p

etit

ione

r ap

proa

ched

the

Hon

'ble

Dis

tric

t C

ourt

in

Man

galo

re a

nd s

ecur

ed a

tem

pora

ry i

njun

ctio

n re

stra

inin

g M

SEZL

for

m e

ncas

hing

the

BG

. A

fter

the

mat

ter

cam

e up

for

ar

gum

ent

in t

he C

Our

t an

d se

vera

l ad

jour

nmen

ts,

the

case

file

d by

pet

itio

ner

as d

ism

isse

d by

Hon

'ble

on

05th

Apr

il 20

14.

The

peti

tion

er h

as a

lso

init

iate

d pr

ocee

ding

s in

the

mat

ter.

In o

rder

to

set

tle

the

disp

ute

out

of c

ourt

/arb

itra

tion

an

oppo

rtun

ity

for

redr

essa

l th

roug

h an

in

depe

nden

t co

mm

itte

e M

SEZL

so

ught

co

nsen

t fo

r co

nsti

tuit

ng

an

Out

side

Ex

pert

C

omm

itte

e (O

EC)

whi

ch w

as a

ccep

ted

by p

etit

ione

r. Th

e ar

bitr

atio

n pr

ocee

ding

s w

as p

ut o

n ho

ld w

hile

OEC

too

k ov

er t

he d

ispu

te r

esol

utio

n.

The

OEC

has

rec

omm

eded

MSE

ZL t

o pa

y Rs

.9.3

9 C

r to

pet

itio

ner.

How

ever

, the

pet

itio

ner

did

not

acce

pt t

he t

he r

ecom

men

dati

ons

of t

he O

EC a

nd c

hoos

e to

pur

sue

the

Arb

itra

tion

pro

ceed

ings

. Th

e A

rbit

ral T

ribu

bal h

ad p

asse

d th

e aw

ard

on 2

4.09

.201

6 st

atin

g th

at t

he p

erfo

rman

ce a

nd c

ompl

etio

n of

wor

ks u

nder

the

con

trac

t w

as o

n ac

coun

t of

bre

ache

s/de

faul

ts c

omm

itte

d by

MSE

ZL a

nd

term

inat

ion

of c

ontr

act

was

unl

awfu

l. M

SEZL

was

dir

ecte

d to

pay

to

Rs.

19,2

3,53

,085

6,9

0,09

,159

MSE

ZL

has

file

fo

r m

odif

icat

ion

of

the

orde

r be

fore

the

Tri

buna

l. M

SEZL

an

d al

so

CV

CC

ha

ve

file

d a

peti

tion

co

ntes

ting

th

e A

rbit

rati

on

Aw

ard

befo

re t

he P

rl.D

istr

ict

& S

essi

ons

Cou

t at

Man

galu

ru u

nder

AS

No.

1of

201

7 &

AS

No2

of

2017

in

Jan

& F

eb ‘

17.

The

mat

ters

wer

e sc

hedu

led

on

25th

N

ovem

ber,

2017

for

app

eare

nce

of t

he

arbi

trat

ors.

Mea

nwhi

le,

the

BG i

ssui

ng

Bank

ha

d al

so

file

d an

im

plea

ding

ap

plic

atio

n. B

oth

the

part

ies

have

not

ob

ject

ed t

o th

e im

plea

ding

app

licat

ion

of t

he B

nak.

The

mat

ters

are

pos

ted

for

argu

men

ts o

n 27

th A

pril,

201

8

TOTA

L 7

,53,

75,6

59


119


Note 47: Critical judgements in applying accounting policies

I. Recognistion of Revenue

(a) The Company has recognized revenues amounting to Rs.11.73 Crores for current year 2017-18 (for

previous year 2016-17 Rs.11.64 Crores towards Zone Operation and Maintenance charges (O & M).

The agreements for Zone O & M charges are under finalization. Pending finalization of agreements,

O & M charges are recognized at cost plus markup. Adjustments for increase / decrease will be given

effect in the year in which agreements are finalized.

(b) The Company’s power distribution business is rate / tariff regulated by Karnataka Electricity Regulatory

Commission (KERC). Hence, the Company files Annual Revenue Requirement / tariff application before

KEFC. The KERC passes tariff order determining and notifies the retail supply tariff to be charged

from Consumers. In respect of FY 2017-18, the revenue is recognized based on the KERC tariff order

dated May 8, 2017 applicable w.e.f. April 1, 2017. The Company upon submission of Annual audited

accounts (pertaining to power distribution business) the KERC appraises the accounts and finalizes the

revenue requirement. Thus, on final determination of the revenue requirement / by KERC, the effect

will be given for the difference, if any accordingly.

(c) One time fee towards right to use 'Road cum Corridor Project' which is in the nature of operating lease

is recognised as income on a straight line basis over the period of right to use.

II. Recognition of borrowing cost

Borrowing costs are charged to the Statement of Profit & Loss applying the effective interest method.

The interest charged on the loan is 25 basis point plus one year Maximum Commercial Lending Rate (MCLR)

rate of the Lender. If the Lender changes the MCLR rate, the effective rate of interest will also change

resulting in reduction or increase in interest cost.

III. Estimated useful life of tangible and intangible assets

(a) The Company has estimated the useful life of certain assets based technical evaluation and that

of certain assets based on useful life as specified in Schedule-II to the Companies Act, 2013. The

Management believes that these estimated useful lives are realistic and reflect fair approximation of

the period over which the assets are likely to be used. The estimated useful life and residual values are

reviewed at the end of each financial year and if necessary, changes in estimates are accounted. The

Company has adopted unit of production method for charging depreciation in respect of River Water

Assets and Tertiary Treatment Plant assets (both excluding Electrical Installations and Equipment)

Under unit of production method, the Management estimates the production likely to be achieved in

future years. The actual productions are reviewed at the end of each financial year and if necessary,

changes in estimation are accounted.

(b) The Company amortizes the cost of barrage useful usage rights on a straight-line basis over the lease

period.


120

IV. Impairment of Trade Receivable

The impairment provision for financial assets is based on the assumption about risk of default and expected

loss rates. The Company uses judgements in making these assumptions and selecting the input impairment

calculation based on the Company past history as well as forward looking assumptions at the end of each

reporting period.

V. Income taxes

The computation of advance taxes, provision for current / deferred tax are made based on significant

judgements and which may get revised pursuant to position taken by the tax authourities.






121


Report on the Consolidated Financial Statements

We have audited the accompanying Consolidated IND AS financial statements of MANGALORE SEZ LIMITED (“the

Holding Company”), and its subsidiaries (Collectively referred to as “the Group”) which comprise of the Consolidated

Balance Sheet as at 31st March 2018, the Consolidated Statement of Profit and Loss, the Consolidated Changes in

Equity and the Consolidated Cash Flow Statement for the year then ended, and a summary of significant accounting

policies and other explanatory information (hereinafter referred to as “the consolidated financial statements”).

Management’s Responsibility for the Standalone Financial Statements

The Holding Company’s Board of Directors is responsible for the preparation of these IND AS consolidated financial

statements in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as “the Act”) that

give a true and fair view of the consolidated financial position, consolidated financial performance and including

other comprehensive income and consolidated cash flows of the Group in accordance with the Indian Accounting

Standards (Ind AS) specified under section 133 of the Act, read with the Companies (Indian Accounting Standards)

Rules, 2015, as amended, and other accounting principles generally accepted in India.

The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate

accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for

preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting

policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and

maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and

completeness of the accounting records, relevant to the preparation and presentation of the financial statements

that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have

been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding

Company, as aforesaid.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated IND AS financial statements based on our audit. In

conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards

and matters which are required to be included in the audit report under the provisions of the Act and the Rules made

thereunder. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10)

of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance about whether the consolidated Ind AS financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the

Consolidated Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including

the assessment of the risks of material misstatement of the Consolidated Ind AS financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant

to the Holding Company’s preparation of the Consolidated financial statements that give a true and fair view in

INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF MANGALORE SEZ LIMITED


122

order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the

appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the

Company’s Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of

their reports referred to in sub-paragraph (a) of the other matters paragraph below, is sufficient and appropriate to

provide a basis for our audit opinion on the Consolidated Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us and based on the

Consideration of reports of other auditors on separate financial statements of subsidiaries referred to below in the

other matters Paragraph, the aforesaid consolidated Ind AS financial statements give the information required by

the Act in the manner so required and give a true and fair view in conformity with the Ind AS and other accounting

principles generally accepted in India, of the consolidated state of affairs of the Group, as at 31st March, 2018, and

their consolidated Profit, Consolidated total Comprehensive Income, Consolidated statement of changes in equity

and their consolidated cash flows for the year ended on that date.

Other Matters

We did not audit the financial statements of one subsidiary whose financial statements reflect total assets of

Rs.58.33 lakhs as at 31st March 2018, total revenues of Rs NIL lakhs and net cash flows amounting to Rs.26.99 lakhs

for the year ended on that date, as considered in the consolidated financial statements. These financial statements

have been audited by other auditors, whose reports have been furnished to us by the management and our opinion

in the consolidated financial statements.in so far as it relates to the amounts and disclosure included in respect of

these subsidiaries, and our reports in terms of subsection (3) and (11) of section 143 of act, insofar as it relates to the

aforesaid subsidiaries, is based solely on the reports of the other auditors.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act,we report to the Extent applicable that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and

belief were necessary for the purposes of our audit of the consolidated financial statements.

(b) In our opinion, proper books of account as required by law relating to preparation of the aforesaid

consolidated Ind AS financial statements have been kept by the Company so far as it appears from our

examination of those books

(c) The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss,(including other

comprehensive income) and the Consolidated Cash Flow Statement dealt with by this Report are in agreement

with the relevant books of account maintained for the purpose of preparation of the consolidated Ind AS

financial statements.

(d) In our opinion, the aforesaid consolidated Ind AS financial statements comply with the Accounting Standards

specified under Section 133 of the Act.

(e) On the basis of the written representations received from the directors of the Holding Company as on

31st March, 2018 and taken on record by the Board of Directors of the Holding company, none of the


123


directors of the subsidiary companies, none of the directors of the group companies is disqualified as on

31st March, 2018 from being appointed as a director in terms of Section 164 (2)of the Act.

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and

the operating effectiveness of such controls, refer to our separate Report in “Annexure A”.

(g) with respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of

the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and

according to the explanations given to us:

(i) the Company has disclosed the impact of pending litigations on its financial position in its financial

statements - Refer Note No.45(b) to the financial statements;

(ii) the group did not have any long-term contracts, including derivative contracts; and

(iii) There has not been an occasion in case of the Company during the year under report to transfer

any sums to the investor Education and protection Fund by the Holding company and its subsidiary

Company. Therefore the question of delay in transferring such sums does not arise.




Sd/-N R Suresh

PartnerM.No: 021661


124

ANNEXURE “A” to The Independent Auditor’s Report of even date on the Consolidated IND AS Financial Statements of Mangalore SEZ Limited.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Mangalore SEZ Limited (“the Holding

Company”) and its subsidiary companies as of March 31, 2018 in conjunction with our audit of the Consolidated

Financial Statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The respective Board of directors of the Holding company, its subsidiary company are responsible for establishing

and maintaining internal financial controls based on “the internal control over financial reporting criteria established

by the Company considering the essential components of internal control stated in the Guidance Note on Audit of

Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI).

These responsibilities include the design, implementation and maintenance of adequate internal financial controls

that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to

Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy

and completeness of the accounting records and the timely preparation of reliable financial information, as required

under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based

on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls

Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be

prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial

controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered

Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over

financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial

controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls

over financial reporting included obtaining an understanding of internal financial controls over financial reporting,

assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness

of internal control based on the assessed risk. The procedures selected depend on the Auditor’s judgment, including

the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes


125


in accordance with generally accepted accounting principles. A company’s internal financial control over financial

reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

statements in accordance with generally accepted accounting principles, and that receipts and expenditures

of the company are being made only in accordance with authorisations of management and Directors of the

company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or

disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of

collusion or improper management override of controls, material misstatements due to error or fraud may occur and

not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future

periods are subject to the risk that the internal financial control over financial reporting may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Holding Company its subsidiary companies have, in all material respects, an adequate internal

financial controls system over financial reporting and such internal financial controls over financial reporting were

operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established

by the Company considering the essential components of internal control stated in the Guidance Note on Audit of

Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.




Sd/-N R Suresh

PartnerM.No: 021661


126

Consolidated Balance Sheet as at 31st March, 2018Amount in Rs.

Notes As at 31.03.2018

As at 31.03.2017

ASSETS(1) Non-current assets

(a) Property, plant and equipment 3 8,23,30,87,352 5,36,72,81,001(b) Capital work in progress 4 1,70,57,29,852 4,50,84,97,393(c) Investment Property 5 4,49,88,53,447 4,43,64,25,151(d) Other Intangible Assets 6 13,87,56,612 14,53,91,636(e) Financial Assets (i) Trade Receivables 7 50,00,000 21,98,27,434 (ii) Loans 8 5,25,14,336 5,90,51,185 (iii) Others 9 25,000 25,000(f) Other non-current assets 10 26,64,55,226 22,78,42,795

14,90,04,21,825 14,96,43,41,595(2) Current assets

(a) Financial Assets (i) Investments 11 54,86,69,727 18,27,24,487 (ii) Trade receivables 12 1,69,80,39,815 51,96,65,686 (iii) Cash and cash equivalents 13 8,39,56,940 42,91,24,182 (iv) Bank Balances other than (iii) above 14 16,24,77,476 13,08,71,495 (v) Loans 15 90,000 90,000 (vi) Others 16 95,50,187 41,93,779(b) Current tax asset (Net) 17 78,97,267 4,51,86,072(c) Other current assets 18 3,54,35,245 2,08,55,847

2,54,61,16,657 1,33,27,11,548Total Assets 17,44,65,38,482 16,29,70,53,143EQUITY AND LIABILITIES

(1) EQUITY(a) Equity Share capital 19 50,00,12,000 50,00,12,000(b) Other equity 20 20,81,08,640 17,14,10,916Total Equity Attributable to owners of the Company 70,81,20,640 67,14,22,916Non-Controlling Interests 19 1,50,000 1,50,000Total Equity 70,82,70,640 67,15,72,916LIABILITIES

(2) Non-current liabilities(a) Financial Liabilities (i) Borrowings 21 5,62,92,06,409 5,72,49,45,643 (ii) Other financial liabilities 22 29,69,062 1,78,94,407(b) Provisions 23 1,49,99,448 1,32,24,441(c) Deferred tax liabilities (Net) 24 40,73,71,090 35,49,38,091(d) Other Non Current Liabilities 25 9,31,66,46,351 8,31,17,75,892

15,37,11,92,360 14,42,27,78,474(3) Current liabilities

(a) Financial Liabilities (i) Trade payables 26 19,87,41,750 14,06,92,423 (ii) Other financial liabilities 27 83,49,63,185 82,53,17,458(b) Other current liabilities 28 25,26,80,141 14,91,34,361(c) Provisions 29 8,06,90,407 8,75,57,511

1,36,70,75,482 1,20,27,01,753Total liabilities 16,73,82,67,842 15,62,54,80,227Total Equity and Liabilities 17,44,65,38,482 16,29,70,53,143


As per our report attached For and on behalf of the Board For Maharaj N R Suresh and CoChartered Accountants(Firm's Registration No.001931S)



Place: New Delhi Place: New DelhiDate: 14/05/2018 Date: 14/05/2018


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Consolidated Statement of Profit and Loss for the year ended 31st March, 2018Amount in Rs.

Particulars Notes Year 2017-18

Year 2016-17

I Revenue from Operations 30 1,74,23,05,353 1,28,52,36,171II Other Income 31 3,14,43,778 6,20,44,769III Total Income (I+II) 1,77,37,49,131 1,34,72,80,940IV EXPENSES

Cost of Purchased Power 32 25,54,54,650 10,53,76,965Employee benefit expense 33 8,10,11,267 6,69,13,202Finance costs 34 50,90,28,931 53,34,80,331Depreciation and amortisation Expense 35 41,46,02,971 29,33,30,830Other expenses 36 40,44,83,588 25,67,48,237Total Expense (IV) 1,66,45,81,407 1,25,58,49,565

V Profit / (loss) before exceptional items and tax (III - IV) 10,91,67,724 9,14,31,375VI Exceptional items - - VII Profit / (loss) before tax (V - VI) 10,91,67,724 9,14,31,375VIII Tax expense 37

(1) Current tax 7,87,35,681 1,99,37,649(2) Deferred tax (61,39,396) 13,13,46,605Total Tax expense 7,25,96,285 15,12,84,254

IX Profit / (loss) for the period from continuing operations (VII - VIII) 3,65,71,440 (5,98,52,878)X Profit / (loss) from discontinued operations - - XI Tax expense of discontinued operations - - XII Profit / (loss) from Discontinued operations (after tax) (X -XI) - - XIII Profit / (loss) for the period (IX + XII) 3,65,71,440 (5,98,52,878)XIV Other Comprehensive Income

A (i) Items that will not be reclassified to profit or loss (a) Remeasurement of the defined benefit plans (net of tax) 1,26,284 (14,41,879) (ii) Income tax relating to items that will not be reclassified to profit or lossB (i) Items that will be reclassified to profit or loss (ii) Income tax relating to items that will be reclassified to profit or loss

1,26,284 (14,41,879)XV Total Comprehensive Income for the period (XIII+XIV) (Comprising

Profit (Loss) and Other Comprehensive Income for the period) 3,66,97,724 (6,12,94,757)

XVI Earnings per equity share:(1) Basic 0.73 (1.20)(2) Diluted







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Consolidated Statement of Changes in Equity for the year ended March 31, 2018

(A) Equity Share Capital Amount in Rs.

Balance at the beginning of the reporting period April 01, 2017 50,00,12,000

Changes in equity share capital during the year -

Balance at the end of the reporting period March 31, 2018 50,00,12,000

(B) Other Equity

Amount in Rs.

Reserves and SurplusTOTAL

Retained Earnings

Balance at the beginning of the reporting period April 01, 2017 - (A)

17,14,10,916 17,14,10,916

Additions during the year:

Profit / (Loss) for the year 3,65,71,440 3,65,71,440

Items of OCI for the year, net of taxes:

Remeasurment benefit of defined benefit plans 1,26,284 1,26,284

Total Comprehensive Income for the year 2017-18 - (B) 3,66,97,724 3,66,97,724

Reductions during the year:

Dividends - -

Income tax on dividends

Transfer to general reserves - -

Total (C) - -

Balance at the end of the reporting period March 31, 2018 (A+B-C)

20,81,08,640 20,81,08,640






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Consolidated Cash Flow Statement for the year ended 31st March, 2018 Amount in Rs.


Year 2016-17

A. CASH FLOW FROM OPERATING ACTIVITIESProfit before tax 10,91,67,724 9,14,31,375Adjustments for:- Depreciation, Depletion, Amortisation & Impairment 41,46,02,971 29,33,30,830- Impairment 7,09,24,536 1,31,37,275- Interest on Borrowings 49,84,20,778 49,27,82,572- Interest on security deposits measured at fair value 6,20,401 - - Provision for Gratuity 23,22,202 26,51,493- Provision for Leave Encashment 22,99,565 36,95,938- Provision for other Employee benefits 84,30,000 35,16,782- Interest Income (1,32,50,490) (1,98,23,450)- Interest from security deposits measured at fair value (8,11,781) -- Dividend Income (1,40,70,240) (96,20,005)- Deferred Government Grant (8,25,000) -- Other (describe) - (Profit) / Loss on sale of asset & Loss on sale of asset

1,889 22,598

Operating Profit before Working Capital Changes 1,07,78,32,555 87,11,25,408Adjustments for:- (Increase) / decrease in Trade and other receivables (1,03,44,71,231) (49,89,61,658)- (Increase) / decrease in Other assets (10,34,42,253) 23,17,73,834 -Increase/(Decrease) in Trade payable and other liabilities 1,08,67,05,001 48,53,04,872Increase / (Decrease) in provisions (51,04,799) (49,51,885)Cash generated from Operating activities 1,02,15,19,273 1,08,42,90,572 Income Tax Paid (Net of refund) 2,34,73,266 4,05,83,229 Net Cash generated from Operating activities 99,80,46,007 1,04,37,07,344

B. CASH FLOW FROM INVESTING ACTIVITIESPayments for Property, plant and equipment (44,82,48,898) (68,56,25,833)Payments for investment property (6,24,28,296) (3,75,38,588)Payments for intangible assets - (1,65,000)Proceeds from sale of Property, plant and equipment 5,000 2,200Receipt of government grants 2,97,00,000 2,97,00,000Dividend received from Others 1,40,70,240 96,20,005Interest received 1,36,38,425 2,13,34,906Net Cash used in Investing activities (45,32,63,532) (66,26,72,312)

C. CASH FLOW FROM FINANCING ACTIVITIES:Proceeds from non-current borrowings - 6,37,42,71,086 Repayment of non-current borrowings (6,61,05,000) (6,44,97,28,408)Finance Cost paid (51,78,68,376) (60,40,95,929)Other (describe) - Net Transaction Cost of Refinanced LoanNet Cash used in Financing activities (58,39,73,376) (67,95,53,251)

D Net increase / (decrease) in cash and cash Equivalents (A+B+C):

(3,91,90,901) (29,85,18,219)

Add: Cash and Cash Equivalents as at 1st April 67,22,98,669 97,08,16,888Cash and Cash Equivalents as at 31st March 63,31,07,768 67,22,98,669

Notes:

i The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Indian Accounting Standard

(Ind AS) 7 on Cash Flow statements.

ii Payments for property, plant and equipment includes movement of Capital Work-in-progres during the year.

iii Brackets indicate cash outflow / deduction.


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Amount in Rs.

iv Cash and cash Equivalents as per above comprises of: As at March 31, 2018

As at March 31, 2017

Balances with Banks:

Current account 4,35,88,463 6,86,80,581

Deposits with original maturity of less than three months 4,03,60,392 36,04,36,985

Deposits with original maturity of more than three months 4,81,101 6,04,50,000

Cash on hand 8,085 6,616

Add: Investment in liquid mutual funds 54,86,69,727 18,27,24,487

Cash and Cash equivalents in Cash Flow Statement 63,31,07,768 67,22,98,669

As per our report attached For and on behalf of the Board

For Maharaj N R Suresh and Co


(Firm's Registration No. 001931S)

Sd/- Sd/- Sd/-

N R Suresh Paritosh Kumar Gupta Akshaya Kumar Sahoo

Partner Managing Director Director

Membership No.021661 DIN: 01054182 DIN: 07355933

Sd/- Sd/-

Gouranga Charan Swain V. Phani Bhushan

Chief Financial Officer Company Secretary

Place: New Delhi Place: New Delhi

Date: 14/05/2018 Date: 14/05/2018


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Notes accompanying consolidated financial statements

1. Corporate information

Mangalore SEZ Limited (MSEZ) is a Public Limited Company domiciled and incorporated in India having its Registered Office at 3rd Floor, Mangalore Urban Development Authority (MUDA) Building, Urwa Stores, Ashok Nagar, Mangalore - 575 006.

The Company is jointly promoted by Karnataka Industrial Area Development Board (KIADB), Oil & Natural Gas Corporation Limited (ONGC) and Infrastructure Leasing and Financial Services Limited (IL&FS).

The company’s shares are unlisted and the Company is engaged in developing and maintenance of Special Economic Zone (SEZ) at Mangaluru.

2. Significant accounting policies

2.1. Statement of compliance

The Standalone Financial Statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 and Technical Guide on Accounting for Special Economic Zones (SEZs) Development Activities, issued by the Institute of Chartered Accountants of India.

2.2 Basis of Preparation

The Standalone Financial Statements have been prepared on the historical cost basis except for certain assets and liabilities that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or noncurrent as per the Company’s operating cycle and other criteria set out in Ind AS-I Presentation of Financial Statements (Ind AS-I) and Schedule III to the Companies Act, 2013.

The Standalone Financial Statements are presented in Indian Rupees.

Fair value Measurement

The Company measures financial instruments at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the assets in its highest and best use.


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The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets and liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement at a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.

2.3 Investments in subsidiaries

The Company records the investments in subsidiaries at cost less impairment loss, if any.

2.4 Non-current assets held for sale

Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the assets or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Property, Plant and Equipment and intangible assets are not depreciated or amortized once classified as held for sale.

2.5 Accounting for Government Grants and Disclosure of Government Assistance

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.

These are recognized in the Standalone Statement of Profit and Loss on a systematic basis over the periods in which the Company recognizes the related costs for which the grants are intended to compensate.


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Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized at fair value as deferred revenue and disclosed as ‘Deferred revenue arising from government grant a liability in the Standalone Balance Sheet and transferred to the Standalone Statement of Profit and Loss on a systematic and rational basis over the useful lives of the related assets.

2.6 Tangible Assets – Property, Plant and Equipment

Buildings held for use in the production or supply of goods or services or for administrative purposes, are stated in the Standalone Balance Sheet at cost less accumulated depreciation and impairment losses, if any.

PPE in the course of construction for production, supply or administrative purposes are carried at cost less accumulated depreciation less any recognized impairment loss. The cost of an asset comprises its purchase price or its construction costs (net of applicable tax credits) and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the Management. It includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Company’s accounting policy. Such properties are classified to the appropriate categories of PPE when completed and ready for intended use. Parts of an item of PPE having different useful life and material value and subsequent expenditure on PPE arising on account of capital improvement or other factors are accounted for as separate components.

Depreciation of these PPE commences when the assets are ready for their intended use.

Depreciation is provided on the cost of PPE less residual value, under straight-line method in accordance with the Schedule II to the Companies Act, 2013 adopting the useful life for assets as specified therein, except for the following, whose useful life have been taken on the basis of the technical certification obtained. However, the management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.

Asset Useful life (in years)

Electrical Installations & Equipments 15

Hydraulic works, pipelines & sluices 30

Marine Pipeline Asset – Pipeline Inside Sea 15

TTP Water Membranes 7

Corridor 30

Common Effluent Treatment Plant 15

Depreciation on power distribution assets is provided at the rate of depreciation notified by Central Electricity Regulatory Commission (CERC).

Buildings and pipelines related to River Water System, Tertiary Treatment Plant and Water Treatment Plant are depreciated on Units of Production Method.

The estimated useful lives and residual values are reviewed at the end of each year and if necessary, changes in estimates are accounted for prospectively.

Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.

An item of PPE is de-recognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sale proceeds and the carrying amount of assets and is recognized in the Statement of Profit and Loss.


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2.7 Investment properties (Freehold Land):

Property (Freehold Land) that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the company, is classified as investment property. Investment properties are measured initially at its cost, including related transaction costs, and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

2.8 Intangible Assets

(i) Intangible Assets and Amortization

Intangible assets acquired are measured on initial recognition at cost.

Intangible assets are recognized when it is probable that the future economic benefits that are attributable to the assets will flow to the Company and the cost of the asset can be measured reliably and are amortized under straight line method as follows:

- Specialized software over a period of 5 years from the month of addition.

- Cost of Barrage usage Rights is amortized on a straight line basis over the lease period/life of the underlying asset whichever is less and determined at 25 Years.

(ii) De-recognition of Intangible Assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. When the asset is derecognized, Gains or losses, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized as impairment in the Statement of Profit & Loss.

2.9 Impairment of Tangible and Intangible Assets

The Company reviews the carrying amount of its tangible and intangible assets, Property, Plant and Equipment (including Capital Works in progress) annually to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.

An assessment is made annually as to see if there are any indications that impairment losses recognized earlier may no longer exist or may have come down. The impairment loss is reversed, if there has been a change in the estimates used to determine the asset’s recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized


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for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of impairment loss are recognized in the Statement of Profit and Loss.

2.10 Inventories

Inventories are valued at lower of cost (weighted average method) and net realizable value.

Unserviceable and scrap items, when determined, are valued at estimated net realizable value less all costs necessary to make the sale.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.11 Ind AS 115 - Revenue from Contracts with Customers

The standard is notified on 28.03.2018 and it is applicable for the accounting periods commencing on or after 01.04.2018. Accordingly, this standard is not applicable for preparation of the financial statement for the year ended 31.03.2018. However, application of this standard from 01.04.2018 does not have any impact in the revenue recognition and measurement for the company.

2.12 Revenue recognition

Revenue is recognized at the fair value consideration received or receivable when consideration can be reasonably measured and there exists reasonable certainty of its recovery.

Lease Income and Lease rentals paid are recognized in accordance with the recognition and measurement principles as per Ind AS 17 – Leases

a) Lease Premium:


b) Lease Rentals:

Lease rentals are recognized as and when they fall due as per the terms of the lease agreements.

c) Sale of Goods

Revenue arising from sale of goods is recognized when the significant Risks and Rewards are passed to the buyer and the company does not retain any managerial involvement in the goods transferred and the amount of revenue can be measured reliably.

1. Income from River water and Tertiary Treatment Plant (TTP) are recognized on the basis of quantity committed/delivered to the units and invoiced at the agreed rates.

2. Income from licensed activity (distribution of power) is recognized as per actual consumption billed at Karnataka Electricity Regulatory Commission (KERC) approved tariff.

d) Sale of Services

Revenue from services is recognized when the outcome of services can be estimated reliably and it is probable that the economic benefits associated with rendering of services will flow to the Company, the amount of revenue can be measured reliably.

1. Operation and Maintenance charges (O&M) are recognized based on the agreement with the units. Where agreements are not finalized, O&M charges are recognized at cost plus markup.


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2. Marine outfall usage charges received in advance are recognized over the useful life of the asset on proportionate basis.

3. Corridor usage charges received in advance are recognized over the useful life of the asset on proportionate basis.

e) Non-Operating Revenue

1. Dividend income from the investments is recognized when the right to receive payment is established.

2. Interest income from financial assets is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is that rate exactly discounts the estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount on initial recognition.

3. Rental and other charges for usage of long term assets of the company which do not partake the character of lease, are recognized as and when they fall due as per the terms of the agreements.

2.13 Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

A lease is classified at the inception date as a finance lease or an operating lease.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to the ownership of an asset. Lease other than financial lease are classified as operating lease.

AS LESSEE:

Land acquired from KIADB on a long term lease cum sale and to be converted into a sale subject to fulfillment of the terms and conditions is treated as finance lease and recognized under Investment Property.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Prepayments towards operating lease are amortized on straight line basis over the period of the lease. Contingent rentals, if any, arising under operating leases are recognized as an expense in the period in which they are incurred.

AS LESSOR:

Lease agreements with a definite term with no stipulation for transfer of the ownership of the asset by the end of the lease term or for further renewal, are treated as operating lease.

Lease Premium:


Lease Rentals:

Lease rentals are recognized as and when they fall due as per the terms of the lease agreements.


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2.14 Foreign Exchange Transaction

The functional currency of the Company is Indian Rupees which represents the currency of the economic environment in which it operates.

A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of each reporting period:

a. Foreign currency monetary items are translated using the closing rate.

b. Non Monetary items measured in terms of historical cost in foreign currency are translated using the exchange rate at the date of the transaction.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition or in the previous financial statements are recognized in the statement of profit and loss of the period.

2.15 Employee Benefits

a) Short term employee benefits

All employee benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service are classified as short term employee benefits.

All short term employee benefits are recognized at the undiscounted amount in the accounting period in which they are incurred.

b) Post-employment benefits

i) Defined Contribution Plans: The provident fund scheme and the employee pension scheme are defined contribution plans. The contribution paid / payable under the schemes are recognized during the period in which the employee renders the related service.

ii) Defined Benefit plans: The employee’s gratuity liability is the company’s defined benefit plan. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the term of related obligations.

Actuarial gains and losses are recognized immediately in Other Comprehensive Income (OCI).

c) Long term employee benefits

The obligation for long term employee benefits such as long term compensated absences is recognized in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above.


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Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

2.16 Taxes on Income

Income tax expense represents the aggregate of Current tax and Deferred tax.

(1) Current tax

Current tax is the amount of Income tax payable in respect of the taxable profit for a period.

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect of situations in which applicable tax regulations re subject to interpretation ad establishes provisions where appropriate.

(ii) Deferred Tax

Deferred tax is recognized on deductable/taxable temporary differences between the carrying amounts of assets and liabilities in the Financial Statement and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to get future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with asset will be realized.


139


(iii) Current and deferred tax for the year

Current and deferred tax are recognized in the Statement of Profit and Loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

2.17 Borrowing Costs

Borrowing costs specifically identified in the acquisition or construction of qualifying assets is capitalized as part of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to the Statement of Profit and Loss applying the “effective interest method” as described in Ind AS 109, Financial Instruments.

Borrowing Cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.

2.18 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

Contingent assets are disclosed in the Financial Statements by way of notes to accounts where an inflow of economic benefits is probable.

Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.

2.19 Financial instruments

A Financial Instrument is a contract that gives rise to a financial asset or a financial liability or an equity instrument of another entity.

Financial assets and financial liabilities are recognized when Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the Statement of Profit and Loss.

2.20 Financial assets

Cash and cash equivalents

The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of


140

three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.

Financial assets at amortized cost

Financial assets are subsequently measured at amortized cost using the effective interest method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income.

Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company has made an irrevocable election to present in other comprehensive income subsequent changes in the fair value of equity investments not held for trading.

Financial assets at fair value through profit or loss.

Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition.

Impairment of financial assets

In accordance with Ind AS 109, the group applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure.

a) Lease receivables under Ind AS 17

b) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.

The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:

Trade receivables or contract revenue receivables; and

All lease receivables resulting from transactions within the scope of Ind AS 17

The application of simplified approach does not require the group to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

For recognition of impairment loss on other financial assets and risk exposure, the group determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.

Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.


141


ECL is the difference between all contractual cash flows that are due to the group in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:

All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rate cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.

Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/expense in the statement of profit and loss (P&L). This amount is reflected under the head ‘other expenses’ in the P&L. The balance sheet presentation for various financial instruments is described below:

Derecognition of financial assets

The Company de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in the Statement of Profit and Loss.

2.21 Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and delivered financial instruments.

The measurement of the financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit and loss

Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near team. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the profit and loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains /losses are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.


142

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amorisation is included as finance costs in the statement of profit and loss.

The category generally applies to borrowings.

Financial guarantee contracts

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor falls to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.


Financial liabilities are measured at amortized cost using the effective interest method.

De-recognition of financial liabilities

The Company de-recognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognized and the consideration paid and payable is recognized in the Statement of Profit and Loss.

2.22 Earnings per share

Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.

2.23 Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.


143


2.24 Operating Segments

Operating Segments are identified based on the business activities from which they earn revenue and incur expenses and whose operating results are regularly reviewed by the entities Chief operating decision maker and for which discrete financial information is available.

2.25 Critical Accounting Judgments and Key Sources of Estimation Uncertainty

Application of many of the accounting policies used in preparing the Financial Statements, MSEZ Management makes judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual outcomes could differ from the estimates and assumptions used.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.

Key source of judgments and estimation of uncertainty in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment, useful lives of Property, Plant and Equipment, retirement benefit obligations, provisions, valuation of deferred tax assets and contingent assets & liabilities.

2.26 Critical judgments in applying accounting policies

The following are the critical judgments, apart from those involving estimations (Refer note 46), that the Management have made in the process of applying the Company’s accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.

2.27 Key sources of estimation uncertainty

Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.

a) Impairment of assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired, if any indication exists, or when annual impairment testing for an asset is required, the Company estimates that asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash flows that are largely independent of those from other assets or groups of assets, when the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term


144

growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets / forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.

Impairment losses of continuing operations, including impairment on investments, are recognized in the statement profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties, the impairment is recognized in OCI up to the amount of any previous revaluation surplus.

For assets excluding goodwill, am assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

b) Defined benefit obligation (DBO)

Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.


145


No

te 3

: Pro

per

ty, p

lan

t &

eq

uip

men

tA

mou

nt in

Rs.

Gro

ss c

arry

ing

amou

ntD

epre

ciat

ion

/Am

ortis

atio

nN

et c

arry

ing

amou

nt

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

arD

educ

tions

/Ad

just

men

tsAs

at

31

.03.

2018

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

arD

educ

tions

/Ad

just

men

tsAs

at

31

.03.

2018

As a

t

31.0

3.20

18As

at

31

.03.

2017

Land

- Le

aseh

old

36,2

3,74

5 -

- 36

,23,

745

4,30

,270

2,17

,194

-6,

47,4

6429

,76,

281

31,9

3,47

5

Build

ings

1,48

,17,

64,8

192,

84,3

8,21

,674

4,32

,55,

86,4

934,

53,7

4,37

411

,78,

36,0

51-

16,3

2,10

,425

4,16

,23,

76,0

681,

43,6

3,90

,445

Plan

t and

equ

ipm

ent

3,69

,47,

98,0

8231

,72,

48,6

91 -

4,01

,20,

46,7

7322

,02,

50,4

7412

,62,

59,6

93 -

34,6

5,10

,167

3,66

,55,

36,6

063,

47,4

5,47

,608

Furn

iture

and

fix

ture

s78

,72,

460

6,76

,354

-85

,48,

814

27,5

4,09

710

,76,

213

-38

,30,

310

47,1

8,50

451

,18,

363

Vehi

cles

1,91

,55,

739

- -

1,91

,55,

739

16,8

2,68

722

,74,

744

-39

,57,

431

1,51

,98,

308

1,74

,73,

052

Offic

e eq

uipm

ent

58,2

2,17

74,

54,6

8638

,692

62,3

8,17

127

,01,

692

12,9

5,47

831

,803

39,6

5,36

722

,72,

804

31,2

0,48

5

Road

s69

,72,

60,1

3711

,15,

79,7

81-

80,8

8,39

,918

26,9

8,22

,563

15,9

0,08

,574

-42

,88,

31,1

3738

,00,

08,7

8142

,74,

37,5

74

Tota

l5,

91,0

2,97

,159

3,27

,37,

81,1

8638

,692

9,18

,40,

39,6

5354

,30,

16,1

5740

,79,

67,9

4731

,803

95,0

9,52

,301

8,23

,30,

87,3

525,

36,7

2,81

,001

Prev

ious

Yea

r5,

18,5

1,25

,497

72,9

3,30

,050

41,5

8,38

85,

91,0

2,97

,159

25,6

5,21

,966

28,7

0,20

,078

5,25

,887

54,3

0,16

,157

5,36

,72,

81,0

024,

92,8

6,03

,531

3(i)

Int

eres

t ca

pita

lized

dur

ing

the

year

Rs.

2,25

,73,

364

(pre

viou

s ye

ar -

NIL

)3(

ii) T

he c

ompa

ny h

as t

aken

bor

row

ings

fro

m b

ank

whi

ch c

arry

cha

rge

over

all

the

asse

ts o

f th

e co

mpa

ny (

refe

r N

ote

no.2

1 to

war

ds s

ecur

ity

and

pled

ge).

3(iii

) Ref

er N

ote

No.

45 (

a) f

or d

iscl

osur

e of

con

trac

tual

com

mit

men

ts f

or a

cqui

stio

n of

Pro

pert

y, P

lant

& E

quip

men

t 3(

iv) C

orr

ido

r A

sset

:

In t

he d

evel

opm

ent

of t

he S

peci

al E

cono

mic

Zon

e (S

EZ),

the

Com

pany

has

set

up

a Pi

pelin

e-cu

m-R

oad

Cor

rido

r Pr

ojec

t fr

om N

ew M

anga

lore

Po

rt T

rust

(NM

PT) t

o M

anga

lore

SEZ

(MSE

Z).

The

proj

ect h

as b

een

deve

lope

d on

a s

elf-

sust

aina

ble,

cos

t and

reve

nue

mod

el u

nder

an

agre

emen

t w

ith

two

cust

omer

s vi

z., M

RPL

and

OM

PL.

In t

erm

s of

the

agr

eem

ent:

(i)

All

the

thre

e pa

rtie

s ha

ve c

ontr

ibut

ed in

equ

al s

hare

s to

war

ds c

ost

of t

he p

roje

ct;

(ii)

The

titl

e, o

wne

rshi

p, p

osse

ssio

n an

d m

aint

enan

ce o

f th

e as

sets

ves

ts w

ith

MSE

Z on

ly;

(iii)

OM

PL a

nd M

RPL

have

bee

n gi

ven

perp

etua

l rig

hts

to u

se th

e co

rrid

or fo

r spe

cifie

d w

idth

leav

ing

subs

tant

ial w

idth

of t

he c

orri

dor f

or c

omm

erci

al

expl

oita

tion

by

MSE

ZL(iv

) The

‘use

rshi

p fe

e’ r

elat

ing

to t

he w

idth

allo

cate

d to

OM

PL a

nd M

RPL

on ‘c

ost

basi

s’ is

adj

uste

d ag

ains

t th

e co

ntri

buti

on a

nd t

he b

alan

ce is

als

o tr

eate

d as

‘u

ser

fee’

but

rec

kone

d fo

r ‘r

esid

ual c

ontr

ibut

ion’

.(v

) Th

e re

venu

e on

the

cor

rido

r pr

ojec

t fr

om t

hird

par

ty c

usto

mer

s ac

crue

to

the

thre

e pa

rtie

s in

the

rat

io o

f th

eir

‘res

idua

l con

trib

utio

ns’.


146

Note 4: Capital work in progress

Amount in Rs.Particulars As at 31.03.2018 As at 31.03.2017

Capital work in progress

Development of Land 1,02,73,01,082 99,03,77,223

Infrastructrure Development 67,84,28,770 3,51,81,20,170

Total 1,70,57,29,852 4,50,84,97,393

4(i) Capital work in progress includes interest capitalized during the year NIL (March 31, 2017 Rs.11,03,21,219/-)

4(ii) Capital work in progress includes Rs.1,02,33,74,602 as at March 31, 2018 (Rs.99,03,77,223 as at March 31,

2017) mandatory and unavoidable expenditure incurred on creation of infrastructure at R&R colony, pursuant

to the Government of Karnataka Order No. KE 309 REH, 2006, Bangalore dated 20.06.2007. The expenditure

will be transferred to the cost of land in the year in which the obligation is completed.

4(iii) The Company has an obligation vide Government Order No. RD 309 REH 2006 dated 20.06.2007 to provide

various compensations to the Project Displaced Families (PDFs) including one job per family and sites for

construction. The PDFs can opt for cash in lieu of site and cash in lieu of job. The estimated provision in respect

of various compensations is as under which has been included in development of land.

Amount in Rs.


Rehabilitation Compensation including training 61,97,591 1,12,11,961

Rehabilitation Colony Development Cost 7,22,44,681 7,51,63,040

Total 7,84,42,272 8,63,75,001

The Company has made the above provision based on present obligation as a result of past event. Further,

the said R&R package has been amended vide G.O. No. RD 116 REH 2011 dated 02.12.2011 by including the

following:

a) Exit Option - the PDF’s can opt for an ex-gratia cash in lieu of employment, in addition to the one time

cash compensation payable as per earlier G.O.

b) payment of stipend/sustenance allowance to PDF / nominees who do not opt for the ex-gratia as mentioned

in option (a) above.

4(iv) The company has taken borrowings from bank which carry charge over all the assets of the company (refer

Note no.21 towards security and pledge).

4(v) Refer Note No.45 (a) for disclosure of contractual commitments for acquistion of Plant, Property & Equipment.


147

Mangalore SEZ LimitedN

ote

5: I

nve

stm

ent

Pro

per

tyA

mou

nt in

Rs.

Gro

ss c

arry

ing

amou

nt A

mor

tisat

ion

Net

car

ryin

g am

ount

As a

t

01.0

4.20

17Ad

ditio

ns

durin

g th

e ye

arD

educ

tions

/Ad

just

men

tsAs

at

31

.03.

2018

As a

t 01

.04.

2017

Addi

tions

du

ring

the

year

Ded

uctio

ns/

Adju

stm

ents

As a

t

31.0

3.20

18As

at

31.0

3.20

18As

at

31

.03.

2017

Lan

d - L

ease

cum

Sa

le4,

43,6

4,25

,151

6,24

,28,

296

- 4,

49,8

8,53

,447

- -

- -

4,49

,88,

53,4

474,

43,6

4,25

,151

Prev

ious

Yea

r4,

39,8

8,86

,563

5,03

,63,

250

1,28

,24,

662

4,43

,64,

25,1

51-

--

-4,

43,6

4,25

,151

4,39

,88,

86,5

63

5(i)

Re

fer

note

44

on 'a

mou

nts

reco

gnis

ed in

sta

tem

ent

of p

rofit

& lo

ss a

ccou

nt'.

5(ii)

N

o fa

ir v

alue

has

bee

n ob

tain

ed f

or in

vest

men

t pr

oper

ty.

5(iii

)

Refe

r Not

e N

o.45

(a) f

or d

iscl

oure

of c

ontr

auca

l obl

igat

ion

to p

urch

ase,

con

stru

ct o

r dev

elop

inve

stm

ent p

rope

rty

or fo

r its

repa

irs,

mai

nten

ance

or e

nhan

cem

ent.

5(iv

) Re

fer

Not

e 38

(i) o

n Fi

nanc

e le

ase.

No

te 6

: Oth

er In

tan

gib

le A

sset

s A

mou

nt in

Rs.

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As at 31.03.2017

Trade receivables(a) Secured, considered good - - (b) Unsecured, considered good 50,00,000 21,98,27,434(c) Unsecured, considered doubtful debts - - Less: Allowance for doubtful debts - - Total 50,00,000 21,98,27,434



As at 31.03.2017

Security Deposit 5,25,14,336 5,90,51,185Total 5,25,14,336 5,90,51,185

Break-up for Security DetailsAmount in Rs.


As at 31.03.2017

Secured, considered good - -

Unsecured, considerd good 5,25,14,336 5,90,51,185

Unsecured, considered doubtful - -

Total 5,25,14,336 5,90,51,185

Note 9: Other Financial AssetsAmount in Rs.


As at 31.03.2017

Balance with banks (more than 12 months) 25,000 25,000Total 25,000 25,000

Note 10: Other Non current Assets Amount in Rs.


As at 31.03.2017

Capital Advances: 3,35,20,822 4,13,10,575Others- Security deposits 58,70,234 - - Income Tax (Net of Provision) 22,70,64,170 18,65,32,220Total 26,64,55,226 22,78,42,795


149


Note 11: InvestmentsAmount in Rs.


As at 31.03.2017

Investments in Mutual Funds - Quoted

(i) UTI Liquid cash plan - Institutional - Direct Plan - Daily dividend reinvestment

1,47,641.072 units of face value Rs.1019.4457 each (Previous year 1,79,239.058 units of face value Rs.1019.4457)

15,05,12,056 18,27,24,487

(ii) SBI Magnum Insta Cash Fund - Direct Plan - Daily Dividend

2,37,701.815 units of face value Rs.1675.03 each 39,81,57,671 -

Total 54,86,69,727 18,27,24,487

Aggregate amount of quoted investments - At market value 54,86,69,727 18,27,24,487



As at 31.03.2017

Trade receivables

(a) Secured, considered good - -

(b) Unsecured, considered good 1,69,80,39,815 51,96,65,686

(c) Unsecured, considered doubtful debts 18,13,90,689 11,04,66,153

1,87,94,30,504 63,01,31,839

Less: Allowance for doubtful debts 18,13,90,689 11,04,66,153

Total 1,69,80,39,815 51,96,65,686

The trade receivables includes Rs.85.58 crore due from a customer for more than a year which in the opinion of the management does not require an impairment provision as dues have been confirmed by the customer by their letter dated April 16,2018.

Note 13: Cash and Bank BalancesAmount in Rs.


As at 31.03.2017

(A) Cash and Cash Equivalents

(a) Balances with banks:

Current accounts 4,35,88,463 6,86,80,581

(b) Cash on hand 8,085 6,616

Total (A) 4,35,96,548 6,86,87,197

(B) Other balances with banks

Term deposits with original maturity of less than three months 4,03,60,392 36,04,36,985

Total (B) 4,03,60,392 36,04,36,985

Total (A+B) 8,39,56,940 42,91,24,182


150

Note 14: Bank Balances other than aboveAmount in Rs.


As at 31.03.2017

Other Balances with banksTerm Deposits with original maturity of more than three months but less than 12 months

4,81,101 6,04,50,000

Term deposits held as margin money 16,19,96,375 7,04,21,495Total 16,24,77,476 13,08,71,495



As at 31.03.2017

Security Deposit 90,000 90,000Total 90,000 90,000

Note 16: Others Amount in Rs.


As at 31.03.2017

Due from others 61,74,759 4,30,416Interest accrued on deposits 33,75,428 37,63,363Total 95,50,187 41,93,779

Note 17: Current tax asset (net)Amount in Rs.


As at 31.03.2017

Income tax (Net of provisions) 78,97,267 4,51,86,072Total 78,97,267 4,51,86,072

Note 18: Other current assetsAmount in Rs.


As at 31.03.2017

Advances other than capital advances

(i) Advances to Suppliers 3,00,000 28,04,272

(ii) Balances with government authourities

Goods and Service Tax Input 60,92,690 -

Service Tax 16,87,404 24,03,134

VAT 74,58,337 1,26,81,197

Prepaid expenses 1,98,96,814 25,60,023

Other Receivables - 4,07,221

Total 3,54,35,245 2,08,55,847


151


Note 19: Equity Share Capital Authorised, Issued, Subscribed and Paid up Share Capital

Amount in Rs.As at

31.03.2018As at

31.03.2017

Authorised :

425000000 Equity Shares of Rs.10 each 4,25,00,00,000 4,25,00,00,000

Issued:

100000000 Equity Shares of Rs.10 each fully paid up 1,00,00,00,000 1,00,00,00,000

Subscribed and fully Paid up capital:

50001200 Equity Shares of Rs.10 each fully paid up 50,00,12,000 50,00,12,000

50,00,12,000 50,00,12,000

Amount in Rs.As at

31.03.2018As at

31.03.2017Equity Attributable to Non Controlling Interests 1,50,000 1,50,000

a) Reconciliation of equity shares outstanding at the beginning and at the end of year:

Fully paid Equity shares As at 31.03.2018 As at 31.03.2017

No. of Shares Amount in Rs. No. of Shares Amount in Rs.

At the beginning of the year 5,00,01,200 50,00,12,000 5,00,01,200 50,00,12,000

Add: Issued during the year - - - -

At the end of the year 5,00,01,200 50,00,12,000 5,00,01,200 50,00,12,000

b) Terms / rights attached to equity shares:

(i) The Company has issued only one class of equity shares and no securities have been issued with the right / option to convert the same into equity shares at a later date.

(ii) No shares have been reserved for issue under options and contracts / commitments for the sale of shares / disinvestment.

(iii) The shares issued and subscribed carry equal rights and voting power.

(iv) All the shares issued and subscribed carry equal right of dividend declared by the Company and no restrictions are attached to any specific shareholder.

c) Details of Shareholders holding more than 5% of equity shares in the Company:

Name of the ShareholdersAs at 31.03.2018 As at 31.03.2017





Fully paid Equity Shares of Rs.10 each held by:

Infrastructure Leasing and Financial Services Limited (Associate)

2,50,00,000 50% 2,50,00,000 50%

Oil and Natural Gas Corporation Limited (Associate) 1,30,00,000 26% 1,30,00,000 26%

Karnataka Industrial Area Development Board (Associate)

1,15,00,000 23% 1,15,00,000 23%


152

Note 20: Other EquityAmount in Rs.

Particulars Reserves and Surplus

Retained Earnings Total Balance at the beginning of the reporting period April 01, 2017 - (A) 17,14,10,916 17,14,10,916 Additions during the year: Profit / (Loss) for the year 3,65,71,440 3,65,71,440 Items of OCI for the year, net of taxes: Remeasurment benefit of defined benefit plans 1,26,284 1,26,284 Total Comprehensive Income for the year 2017-18 - (B) 3,66,97,724 3,66,97,724 Reductions during the year: Dividends - - Income tax on dividends Transfer to general reserves - - Any other change - - - Total (C ) - - Balance at the end of the reporting period March 31, 2018 (A+B-C) 20,81,08,640 20,81,08,640

Note 21: Borrowings Amount in Rs.

Particulars Maturity date Terms of repayment Effective

interest rateAs at

31.03.2018As at

31.03.2017Secured Rupee Term Loans March

2032Sixty two unequal

quarterly installments8.24%

(9.35%)*5,72,80,71,409 5,79,10,50,643

Total non-current borrowings 5,72,80,71,409 5,79,10,50,643Less: Amount included under the head "Other financial liabilities" - 'Current maturities of long-term debt' (Refer note 27)

(9,88,65,000) (6,61,05,000)

Total 5,62,92,06,409 5,72,49,45,643

* Indicates the EIR as at 31.03.2017

(i) Term loan from banks including current maturities is secured by mortagage of the land and structure / lease hold rights, of the entire immovable assets of the borrower both present and future, excluding land & structure pertaining to the rehabiltation and resettlement of the colony and lands for which lease agreements with tenants of the SEZ project already in place. First charge on the entire assets of the borrower present and future both movable and immovable. First charge on all revenues / receivables accuring to the project.

(ii) There has been no default in payment of principal and interest during the year.

(iii) During the year the company has received sanction from Corporation bank, Mangaluru for Rs.121 Crore and has executed the term loan agreement on March 15, 2018. The modification charge has been created with the same conditions of that of Lead bank (State Bank of India). However, the company has not availed the said loan before March 31, 2018.

Note 22: Other financial liabilitiesAmount in Rs.


As at 31.03.2017

Trade Deposits 29,69,062 1,78,94,407Total 29,69,062 1,78,94,407


153


Note 23: Provisions Amount in Rs.


As at 31.03.2017

Provision for employee benefits



Total 1,49,99,448 1,32,24,441

Note 24: Deferred tax The major components of deferred tax (liabilities) / assets arising on account of timing differences are as follows:


Amount in Rs.

Particulars

Balance Sheet

Profit and Loss OCI Balance

Sheet

01.04.2017 2017-18 2017-18 31.03.2018

Difference between written down value / capital work in progress of fixed assets (including Investment Property) as per the books of accounts and Income Tax Act, 1961

32,65,25,458 15,08,33,768 - 47,73,59,226

Difference between written down value of Intangible assets as per the books of accounts and Income Tax Act, 1961

2,34,10,122 65,37,416 - 2,99,47,538

Expense claimed for tax purposes on payment basis - - - -

Provision for expense allowed for tax purpose on payment basis

- (89,53,332) - (89,53,332)

Remeasurment benefit of the defined benefit plans through OCI

- - 66,834 66,834

DTA on non refundable one time user fee considered as income for Income Tax, while the same is amortized over the period of agreement under IND AS

(9,52,88,451) (9,52,88,451)

Difference in carrying value and tax base of unwinding of security deposit

- 66,233 - 66,233

Difference in carrying value and tax base of term loan measuerd at amortized cost

50,02,510 (4,81,464) - 45,21,046

Deferred tax expense / (asset) - (i) 5,27,14,169 66,834

Deferred tax Asset (MAT entitlement) not recognised in earlier years (ii)

(5,88,53,565) -

Deferred tax expense / (asset) - [(i)-(ii)] (61,39,396)

Net Deferred tax liabilities (Total A) 35,49,38,091 40,77,19,095


154

Movement in MAT Credit EntitlementAmount in Rs.

Details As at 31.03.2018

MAT Credit Entitlement (5,88,53,565)MAT Credit Utilized 5,85,05,560Balance MAT credit available (Total B) (3,48,005)

Total deferred tax liability (Total A + Total B) 40,73,71,090

Note 25: Other non current liabilities Amount in Rs.


As at 31.03.2017

Advances from customers 9,32,65,34,704 8,29,08,56,844 Less: Amount included under the head 'Other Current liabilities' - Advances from customers (refer note 28)

(20,76,14,728) (13,74,80,952)

Total (A) 9,11,89,19,976 8,15,33,75,892Government grant (refer note 42) 18,72,75,000 15,84,00,000Deferred income 1,43,15,164 - Less: Amount included the head 'Other Current Liabilities' - 'Deferred income' (refer note 28)

(38,63,788) -

Total (B) 19,77,26,376 15,84,00,000Total (A+B) 9,31,66,46,351 8,31,17,75,892

Note 26: Trade payablesAmount in Rs.


As at 31.03.2017

Outstanding dues to Micro and Small Enterprises - - Outstanding dues of creditors other than Micro and Small Enterprises 19,87,41,750 14,06,92,423Total 19,87,41,750 14,06,92,423

The classification of the suppliers under Micro, Small and Medium Enterprises Development Act, 2006 is made on the basis of information made available to the Company.

Disclosure requirement as required under Micro, Small, & Medium Enterprises Development Act, 2006 is as follows:

Particulars 31-Mar-18 31-Mar-17a. the principal amount and the interest due thereon remaining unpaid to any supplier

as at the end of accounting yearNil Nil

b. The amount of interest paid by the buyer under MSMED Act, 2006 along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year

Nil Nil

c. the amount of interest due and payable for the period (where the principal has been paid but interest under the MSMED Act, 2006 not paid)

Nil Nil

d. The amount of interest accrued and remaining unpaid at the end of the accounting year and

Nil Nil

e. The amount of further interest due and payable even in the succeeding year, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under Section 23

Nil Nil


155


Note 27: Other financial liabilities

Amount in Rs.


As at 31.03.2017

Current maturity of long term debt (refer note 21) 9,88,65,000 6,61,05,000

Retention monies relating to capital expenditure / projects 14,94,26,316 22,92,19,304

Security Deposits 4,28,46,339 4,00,43,530

Earnest Money Deposit 28,34,750 48,92,050

Payable towards capital / project related expenditure / works 53,25,60,780 48,15,40,792

Payable to employees 84,30,000 35,16,782

Total 83,49,63,185 82,53,17,458

Payable to contractors towards project related EMD accepted by company and retention monies to contractors, are non-interest bearing.

Note 28: Other current liabiltiesAmount in Rs.


As at 31.03.2017

Advances from customers (refer note 25) 20,76,14,728 13,74,80,952

Deferred income (refer note 25) 38,63,788 -

Others

Payable towards WCT under VAT - 3,92,349

Payable towards Service tax - 52,26,102

Payable towards Goods & Service tax 3,50,00,361 -

Payable towards TDS under Income Tax 60,90,106 59,38,518

Payable towards Providend fund, Profession Tax and ESIC 1,11,157 96,440

Total 25,26,80,141 14,91,34,361

Note 29: ProvisionsAmount in Rs.


As at 31.03.2017

Provision for Employee Benefits:



Provision towards Rehabilitation & Resettlement cost (refer note 4 (iii)) 7,84,42,272 8,63,75,001

Total 8,06,90,407 8,75,57,511


156

Movement for Rehabilitation & Resettlement provisionAmount in Rs.


As at 31.03.2017

Opening provision 8,63,75,001 12,21,94,255

Addition during the year 86,87,000 41,19,677

Utilized during the year 1,66,19,729 3,99,38,931

Closing provision 7,84,42,272 8,63,75,001

Note 30: Revenue from OperationsAmount in Rs.


Sale of Products

River water and Tertiary treated water 76,08,14,303 63,55,07,439

Power 29,72,46,579 17,12,64,873

Sale of Services

Land Lease Premium 13,07,19,223 11,43,31,364

Land Lease Rental 4,63,73,020 5,85,25,198

Operation and Maintenance Charges 40,59,51,895 29,31,74,967

Other Operating revenues

Usuage charges towards infrastructure facilities 10,12,00,333 1,24,32,330

Total 1,74,23,05,353 1,28,52,36,171

Note 31: Other IncomeAmount in Rs.


Interest Income

(i) On financial assets measured at amoritzed cost 1,32,50,490 1,98,23,450

(ii) On security deposits measured at amortized cost 8,11,781 -

Dividends from mutual fund investments measure at FVTPL 1,40,70,240 96,20,005

Government grant 8,25,000 -

Other Non operating income 24,86,267 3,26,01,314

Total 3,14,43,778 6,20,44,769

Note 32: Cost of Purchased PowerAmount in Rs.


Purchase of Power 25,54,54,650 10,53,76,965

Total 25,54,54,650 10,53,76,965


157


Note 33: Employee benefit expenseAmount in Rs.


Salaries and wages 7,00,01,636 5,70,54,345

Contribution to provident and other funds 60,29,473 60,76,105

Staff welfare expenses 49,80,158 37,82,752

Total 8,10,11,267 6,69,13,202

Note 34: Finance costsAmount in Rs.


Interest on financial liabilities measured at amortized cost:

- Interest on bank borrowings 49,84,20,778 49,27,82,572

- Interest on security deposit 26,09,091 28,97,498

Interest on security deposits measured at fair value 6,20,401 -

Other borrowing cost 73,78,661 3,78,00,261

Total 50,90,28,931 53,34,80,331

Note 35: Depreciation and Amortisation ExpenseAmount in Rs.


Depreciation of Property, plant and equipment (Refer Note 3) 40,79,67,947 28,64,93,711

Amortisation of Intangible assets (Refer Note 6) 66,35,024 68,37,119

Total 41,46,02,971 29,33,30,830

Note 36: Other ExpensesAmount in Rs.


Rent 1,73,20,809 44,38,011

Rates & Taxes 41,37,698 2,27,750

Repair and Maintenance 23,76,54,401 15,70,36,808

Insurance 51,07,986 56,43,832

Advertising and publicity 25,58,249 21,19,948

Travelling expenses 1,28,27,989 1,52,21,010

Professional & consultancy charges 1,09,37,287 3,84,86,325

Allowance for doubtful debts 7,09,24,536 1,31,37,275

Payment to auditors 7,21,313 5,66,708

Corporate social responsibility 32,11,549 25,63,225

Miscellaneous Expenses 3,90,81,771 1,73,07,346

Total 40,44,83,588 25,67,48,237


158

Note 37: Income tax expense

A. The major components of income tax expense for the year are as under: (i) Income tax recognised / reported in the Statement of Profit and loss

Amount in Rs.

31-Mar-18 31-Mar-17

Current tax:

Current tax on profits for the year 7,87,35,681 1,99,22,382

Adjustments for current tax of prior periods - 15,267

Total current tax expense 7,87,35,681 1,99,37,649

Deferred tax:

(i) Increase / (Decrease) in deferred tax 5,27,14,169 13,13,46,605

(ii) Deferred tax Asset (MAT entitlement) not recognised in earlier years

(5,88,53,565)

Total deferred tax expense / (benefit) (61,39,396) 13,13,46,605

Income tax expense 7,25,96,285 15,12,84,254

Income tax expense is attributable to:

Profit from continuing operations 7,25,96,285 15,12,84,254

B. Reconciliation of tax expense and the accounting profit multiplied by Indian tax rate for the year is as under:

Amount in Rs.


Profit before tax 10,91,67,724 9,14,31,375

Income tax expense calcualted at Company's domestic tax rate at 34.608% (previous year 33.063%)

3,77,80,766 3,02,29,956

Tax Effect of:

- Deduction u/s.80IAB (41,28,59,061) (17,68,22,928)

- Tax effect of unabsorbed depreciation (7,19,24,827)

- Tax effect of non-deductable expenses 1,18,76,843 4,01,64,383

- Effect of income exempted from tax (68,74,049) (31,80,662)

- Effect of receipts which is offered for tax 58,89,40,424 25,35,41,678

- Effect of tax under MAT 72,41,788

- MAT Credit (5,88,53,565) -

- Others (1,54,90,246) 94,772

- Total 7,25,96,285 15,12,68,987

- Adjustments for current tax of prior periods - 15,267

- Tax expense as per Statement of Profit and Loss 7,25,96,285 15,12,84,254

Note: The tax rate used for reconciliation above is the corporate tax rate of 34.608% payable by Corporate entities in India on taxable profits under Indian tax law.


159


Note 38: Lease of Land

(i) Finance Lease:

The Company has obtained on a lease-cum-sale basis from Karnataka Industrial Area Development Board

(KIABD) vide lease-cum-sale agreement dated 28.12.2010. The lease is for a period of 50 years. The lease

agreement with KIADB stipulates various conditions related to lease, including in relation to the manner in

which the Company will obtain freehold title of land. The Company is reasonably certain to obtain freehold

title, since the terms and conditions for conversion to freehold land has been fulfilled and have already

applied to KIADB for absolute sale deed in favour of the Company. Since, reasonable certainity exists that

ownership of the asset - land the economic ownership of the land ab initio would eventually pass on to the

Company the land is accounted as a tangible asset of the Company e.g. Leasehold land convertible into

freehold. Thus in substantive terms, the Company has acquired a tangible asset - only in legal terms the

conversion into freehold status is pending.

The Company paid leasehold premium upfront and same has been capitalized.

The details of land lease period and execution of lease cum sale agreement is as under:

Area Details - in Acres

Total Area as on

31.03.2018

Agreement date

Lease Commence-ment date

Area Registered

as on 31.03.2018

Land surrendered

to KIADB

Balance not registered

as on 31.03.2018

Total Area as on

31.03.2017

Area Registered

as on 31.03.2017

Balance Not registered

as on 31.03.2017

(after surrender to

KIADB)

1972.228.12.2010* 27.01.2010

1543.21 428.99 1985.15 1543.21 441.9429.06.2011# 27.12.2010

2.47 07.12.2011 28.10.2011 2.47 - 2.47 2.47

86.5242 03.11.2014 25.07.2012 86.5242 - 86.5242 86.5242

274.36 - 251.23 23.13 274.36 23.13

9.7667 9.7667 7.35 7.35

2345.32 1632.20 251.23 461.89 2355.85 1632.20 ^472.42

* For 1533.22 acres

# For 9.99 acres

^ Includes 152.1531 Acres allocated to project displaced families

(ii) Operating Lease

The Company has sub leased land inside MSEZ (lease-cum-sale land acquired from KIADB) on operating

lease to various units. The sub-lease are long term in nature and the period of sub-lease with the

units is co-terminous with that of the lease period entered into by the company with KIADB i.e. until

26th January 2060. The sub-lease are non-cancellable and does not include contingent rent. The subleases

are renewable for a further period on substantial terms as specified in the lease agreements.


160

The total future minimum lease premiums/rentals receivable as at March 31, 2018 (based on the agreements

concluded with the units) is as under: Amount in Rs.

As at 31.03.2018

As at 31.03.2017

Not later than one year 65,80,29,474 37,41,17,157

later than one year and not later than five years 24,66,91,727 39,86,32,177

later than five years 2,10,48,29,079 1,93,09,34,623

Note 39 (A): Category-wise Classification of Financial instrumentsAmount in Rs.


Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017


11 - - 54,86,69,727 18,27,24,487

- - 54,86,69,727 18,27,24,487

Amount in Rs.


Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

- -

- - - -

Amount in Rs.

Financial assets measured at amortised cost

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

Trade Receivables 7, 12 50,00,000 21,98,27,434 1,69,80,39,815 51,96,65,686

Cash and cash equivalents 13 - - 8,39,56,940 42,91,24,182


14 - - 4,81,101 6,04,50,000

Term deposits with original maturity of more than 12 months

9 25,000 25,000 - -

Term deposits held as margin money

14 - - 16,19,96,375 7,04,21,495

Security deposit 8, 15 5,25,14,336 5,90,51,185 90,000 90,000

Other Receivables 16 95,50,187 41,93,779

5,75,39,336 27,89,03,619 1,95,41,14,419 1,08,39,45,142


161


Amount in Rs.

Financial liabilities measured at fair value through profit or loss

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

- - - -

Financial liabilities measured at fair value through amortized cost

Refer Note

Non-Current Current

As at 31.03.2018

As at 31.03.2017

As at 31.03.2018

As at 31.03.2017

Term loan from bank 21 5,62,92,06,409 5,72,49,45,643 9,88,65,000 6,61,05,000

Trade deposits 22 29,69,062 1,78,94,407 - -

Trade payables 26 - - 19,87,41,750 14,06,92,423

Retention monies relating to capital expenditure / projects

27 - - 14,94,26,316 22,92,19,304

Security Deposits 27 - - 4,28,46,339 4,00,43,530

Payable to contractors towards project related Earnest Money Deposit

27 - - 28,34,750 48,92,050

Payable towards capital /project related expenditure /works

27 - - 53,25,60,780 48,15,40,792

Payable to employees 27 - - 84,30,000 35,16,782

5,63,21,75,471 5,74,28,40,050 1,03,37,04,935 96,60,09,881

Note 39 (B): Fair value Measurments(i) The following table provides the fair value measurment hirearchy of the Company's financial assets and

liabilities:




Fair Value hierarchyQuoted prices

in active market (Level 1)


inputs (Level 2)


inputs (Level 3)Financial assets measured at fair value through profit or loss (FVTPL)Investments in quoted mutual funds

11 54,86,69,727 54,86,69,727 - -

Financial assets measured at fair value through other comprehensive income (FVTOCI)Investment in unquoted equity shares

- - - -


162






(Level 1)


inputs (Level 2)


inputs (Level 3)



11 18,27,24,487 18,27,24,487 - -



- - - -

(ii) Valuation technique used to determine fair value

Financial instruments measured at fair value

The valuation technique used to value financial instruments at fair value is based on the quoted market prices

of mutual funds recognised at their closing NAV per unit.

Note 39 (C): Financial Risk Management - Objectives and Policies

The Company's financial liabilities comprises mainly of viz., term loan borrowings, trade payables and other payables. The Company's financial assets comprises mainly of cash and cash equivalents, trade receivables, investments in mutual funds and other receivables.

The Company has financial risk exposure in the form of viz., market risk, credit risk and liquidity risk. The Risk Management Committee under the Board of Directors oversees the risk to which the Company is exposed and operates.

The present disclosures made by the Company summarizes the exposure to the financial risks.

1) Market Risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market price comprises three types of risk: currency risk, interest rate risk and other price risk. The financial instruments affected by market risk includes rupee term loan and loans & advance.

a) Interest Rate Risk exposure

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has availed significant rupee term loans at floating (reset every year) interest rates from State Bank of India, New Delhi. The interest rate is at 0.25% (spread) plus MCLR rate of SBI and the interest rate is reset once every year, as per the loan facility agreement. The Company has not entered into any of the interest rate swaps and hence, the Company is exposed to interest rate risk.


163


The exposure of the company's borrowing to interest rate changes at the end of the reporting period are as follows:

Amount in Rs.

31-Mar-18 31-Mar-17

Variable rate borrowings 5,74,11,35,000 5,80,72,40,000

Fixed rate borrowings - -

5,74,11,35,000 5,80,72,40,000

As at the end of the reporting period, the company had the following variable rate borrowings outstanding

31-Mar-18 31-Mar-17


rate

Balance% of total loans


rate

Balance% of total loans

Rupee term loan

8.97% 5,74,11,35,000 100% Rupee term loan

10.32% 5,80,72,40,000 100%

Exposure to cash flow interest rate risk

5,74,11,35,000 Exposure to cash flow interest rate risk

5,80,72,40,000

Interest Rate Senstivity analysis

The Company considering the economic enviornment in which it operates has determined the interest rate sensitivity analysis (interest exposure) at the end of the reporting period. The interest rate for the Company are floating rates and hence, the analysis is prepared assuming the amount of the borrowings outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point +/- fluctuation in the interest rate is used for disclosing the sensitivity analysis.

Amount in Rs. Cr

Impact on Profir before tax

31-Mar-18 31-Mar-17

Interest rates - increase by 50 basis points 2.89 2.93

Interest rates - decrease by 50 basis points (2.89) (2.93)

The interest rate senstivity analysis is done holding on the assumption that all other variables remaining constant.

The increase / decrease in interest expense is cheifly attributable to the Company's exposure to interest rates on its variable rate of borrowigs.

b) Foreign currency risk exposure

Foreing currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreing exchange rates. The Company undertakes transactions in Indian Rupees and its borrowings/ loans payable & trade receivables are also denominated in Indian Rupees and hence, there is no exposure of the Company's operations to foreign exchange rate fluctuations does not arise.


164

Foreign currency rate senstivity analysis Since, there is no foreign currency risk, senstivity analysis for the same does not arise.

c) Other price risk

Other price risk is the risk that the fair value of a financial instruments will fluctutate due to changes in market traded prices. The Companys investment in liquid cash divident reinvestment plan the NAV is fixed and hence, there is no risk price movement arising to the Company. The Company's equity investment in its subsidiary is not held for trading and hence, not subjected to price movement and thus, there is no risk.

2) Credit Risk

The Credit risk refers to risk that a counterparty will default on its contratual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investment in mutual funds, Bank balances and other receivables.

The Company primarily deals with the units/consumers operating inside the Mangalore Special Economic Zone (MSEZ). The units/consumers are the industries who have invested in MSEZ for setting up their industry. The Company enters into MOU / Lease deed for lease of land and receives on-time lease premium (as per agreed milestones) and also collects annual lease rentals. The Company makes sale of products (water; power) and supply of services to units/consumers are through pre-determined contracts and agreed rates. In so far as supply of power is concerned the Company charges tariff based on the approved tariff by regulatory commission. The Company's exposure are continuously monitored and the aggregate value of transactions is reasonably spread amongst the units. Further, the Company has balance leaseable land area of 288 Acres (out of 1075 Acres of leaseable land) as on 31st March, 2018. The Company upon entering into MOU / lease agreement with the prospective units/consumer would receive one-time lease premium and annual rentals and concurrently, would also receive steady operating cash flows through sale of products and supply of services.

The credit risk arising from the exposure of investing in mutual funds and bank balances is limited and there is no collateral held against these because the counterparties are the recognised financial institutions and public sector banks, which are creditworthy.

The credit period in majority of the trade receivables range from 7 days-15 days and average credit period is less than 30 days. Credit risk arising from trade receivables is managed in accordance with the Company's establised policy, procedures and control relating to customer credit risk management. The concentration of the credit risk is limited due to fact that the area of operation of the Company is confined to one geography (MSEZ) and the number of units / consumers are also limited, wherein again the credit risk mitigated through pre-existing contract obligations.

For trade receivables, as a practical expedient, the Company computes the credit loss allowance if there is life-time expected credit losses.

Movement in expected credit loss allowance on trade receivables

Amount in Rs.

Particulars 31.03.2018 31.03.2017

Balance at the beginning of the year 11,04,66,153 11,24,49,250

Loss allowance measured at life time expected credit losses - -

Impairment allowance 7,09,24,537 -

Impairment written-off - (1,51,20,371)

Fair value losses provided - 1,31,37,275

Balance at the end of the year 18,13,90,690 11,04,66,153


165


3) Liquidity risk

Liquidity risk is the risk that the Compnay will encounter difficulty in meeting obligations associated with financial

liabilities that are settled by delivering cash or another financial asset. Liquity risk may result from an inability to

sell a financial asset quickly to meet obligations when due. The Company's exposure to liquity risk arises primarily

from mismatches of maturities of financial assets and liabilities.

The Company manages the liquidty risk by (i) maintaining adequate and sufficient cash and cash equivalents

including investments in mutual funds (ii) making avaliable the funds from realising timely maturities of financial

assets to meet the obligations when due. The management monitors rolling forecast of the Companys liquity

position and cash and cash equivalents on the basis of expected cash flows. Also, the Company manages the

liquidity risk by projecting cash flows considering the level of liquid assets necessary to meet the obligations by

matching the maturity profiles of financial assets and financial liablities and monitoring balance sheet liquidity

ratios. Further, the liquidity risk management involves matching the maturity profiles of financial assets and

financial liabilities.

(i) Financial arrangements

The Company has access to the following undrawn borrowing facilities at the end of the reporting period:

Amount in Rs.

31-Mar-18 31-Mar-17

Expiring within one year 1,21,00,00,000 -

Expiring beyond one year - 1,00,00,000

1,21,00,00,000 1,00,00,000

The company makes an annual / long term financial plan so as to ensure there are no maturity mismatches in

settlement of liabilities.

Note 39(D): Capital Management

The Company's objective when managing capital are to:

a) Safeguard the Company's ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

b) Maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the company may vary the distribution of dividends to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

As at 31st March, 2018, the Company has only one class of equity share and rupee term loan. Consequent to such capital structure, there are no externally imposed capital requirements.

The capital structure of the Company consists of debt (borrowings as detailed in notes 21 and 27) and total equity including advances received from units towards lease of land and use of infrastructure facilities of the Company and monitors capital, based on this capital structure's gearing ratio.


166

The gearing ratio at the end of the reporting period is computed as follows

Amount in Rs.

As at 31.03.2018 As at 31.03.2017

i) Debt 5,72,80,71,409 5,79,10,50,643

ii) Equity share capital 50,00,12,000 50,00,12,000

iii) Other equity 20,81,08,640 17,14,10,916

iv) One time non-refundable amounts from customers 9,32,65,34,704 8,29,08,56,844

v) Total equity [(ii)+(iii)+(iv)] 10,03,46,55,344 8,96,22,79,760

vii) Net Debt to equity ratio (times) 0.6 0.6

Note 40: Related Party disclosures

A Name of related parties and description of relationship:

i Parent entities

Name of the Company Type Place of incorporation

Ownership interest

31-Mar-18 31-Mar-17

Infrastructure Leasing and Financing Services Limited (IL&FS) Associate India 50% 50%

Oil and Natural Gas Corporation Limited (ONGC) Associate India 26% 26%

Karnataka Indutrial Area Development Board (KIADB) Associate India 23% 23%

ii Subsidiaries: (where control exists)

Name of the Company Type Place of Incorporation

Ownership interest

31-Mar-18 31-Mar-17

Mangalore STP Limited Subsidiary India 70% 70%

MSEZ Power Limited Wholly owned subsidiary

India 100% 100%

B Key Management Personnel

(i)

Name Designation

Shri Shashi Shanker Chairman

Shri Paritosh Kumar Gupta Managing Director

Shri Srinivas Santhayya Kamath Independent Director

Shri Inturi Srinivas Nagesh Prasad Independent Director

Shri Saibal Kumar De Nominee Director of IL&FS

Shri Kumar Hariharan Nominee Director of ONGC

Shri Akshaya Kumar Sahoo Nominee Director of ONGC

Smt. C. Vathika Kamath Nominee Director of KCCI

(ii) Shri Velnati Suryanarayana Chief Operating Officer

(iii) Shri Gouranga Charan Swain Chief Financial Officer

(iv) Shri Phani Bhushan Company Secretary


167


C List of related parties

Name of the Company Relationship

ONGC Mangalore Petrochemicals Limited ONGC - Ultimate holding company

Mangalore Refineries and Petrochemicals Limited Subsidiary of ONGC

IIDC Limited Subsidiary of IL&FS

IL&FS Energy Development Company Limited Subsidiary of IL&FS

Karnataka Indutrial Area Development Board A statutory body of Government of Karnataka

D Details of transactions:

(i) Transactions with related parties

Amount in Rs.




31, 2017



Supply of services - Annual lease rental 2,33,96,214 2,33,96,214

Sale of products 27,83,82,460 13,09,87,014


Interest payable on security deposit (Power) 9,70,092 11,93,500


Supply of services - 'By pass road' charges - 52,27,000

Sale of products 25,41,55,693 26,07,68,811



Infrastructure Leasing & Financial Services Limited

Service received - Deputation of MD 33,42,473 56,16,429

Service received - Renting 2,072 11,04,071


Acquisition of land/R&R colony - 1,12,78,050

Services received - Annual Lease rent 5,17,621 5,89,921

Services received - ROW charges - 23,68,700

Towards acquisition of land 1,76,48,000 73,61,550

IIDC LimitedService received - Deputation of Advisor - 16,50,000

Supply of services - Rent 1,36,422 -

IL&FS Energy Development Company Limited Service received - Consultancy - 3,00,000


168

(ii) Outstanding balances with related parties

Amount in Rs.




31, 2017

a. Amount payable:

Infrastructure Leasing and Financing Services Limited (IL&FS) Trade payable 4,50,000 5,51,722


Towards acquisition of land 35,71,91,858 38,17,71,173

Trade payable - 37,696

ONGC Mangalore Petrochemicals Limited Other payable 1,11,01,567 10,74,150

Mangalore Refinery and Petrochemicals Limited Other payable 42,87,970 -

b. Amount Receivable:


Other receivable 1,30,773 1,30,773

ONGC Mangalore Petrochemicals LimitedOther receivable 24,084 15,48,246



Other receivable 2,48,80,606 2,99,82,606


c. Loans and other assets (Debit balances)


Security deposit -Lease of land

11,60,000 11,60,000

Capital advances towards land

3,14,29,250 3,41,61,952

d. Advances & Deposits (Credit balances)


Advance towards Corridor - 97,57,00,000

Security deposit -Power 1,54,00,000 1,54,00,000

Security deposit -River water 31,27,164 31,27,164



Security deposit - Marine Outfall

6,22,209 6,22,209

Security deposit - TTP Water 45,72,668 45,72,668

Security deposit - Hire of Machinery

13,296 13,296

Advance towards Corridor 97,57,33,333 97,57,33,333


169


(iii) Provisions for doubtful debts related to amount of outstanding balances

Amount in Rs.


As at 31.03.2017

ONGC Mangalore Petrochemicals Limited Supply of services 1,55,06,117 2,65,25,680

Mangalore Refinery and Petrochemicals Limited Supply of services 2,57,27,980 -

Total 4,12,34,097 2,65,25,680

(iv) Expense recognised during the period in respect of bad or doubtful debts

Amount in Rs.


As at 31.03.2017

ONGC Mangalore Petrochemicals Limited Supply of services 2,85,164 -

Mangalore Refineries and Petrochemicals Limited

Supply of services - 85,36,542

Total 2,85,164 85,36,542

(v) Compensation to Key management personnel:

(a) Chief opertaing officer

Amount in Rs.




31, 2017



3,78,771 -


Total 61,03,947 32,87,088

(b) Chief financial officer

Amount in Rs.




31, 2017



13,27,707 10,42,831


Total 74,98,359 58,37,677


170

(c) Company Secretary

Amount in Rs.




31, 2017



2,22,972 1,04,125


Total 23,46,091 17,40,156

(d) Independent directors

Amount in Rs.




31, 2017

Sitting fees 3,75,500 6,53,250

Note 41: Employee Benefits

1. Post-employment benefits:

Breif Description: A general description of the type of employee benefit plan is as follows:

Defined benefit gratuity plan (Unfunded):

The company has a defined benefit gratuity plan for its employees. It is governed by Payment of Gratuity Act, 1972. Under the said Act employees who have completed five years of service is entitled to gratuity benefits. The level of benefit provided depends on the employees length of service and last drawn salary.

The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using the projected unit credit method (PUCM)

This post-employment plan typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

Investment Risk The present value of the defined benefit liability is calculated using a discount rate which is determined by reference to markek yields at the end of the reporting period on government bonds

Interest rate Risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan's investments.

Longevity Risk The present value of the defined benefit liability is calculated by reference to the bese estimate of the mortality of plan participants both during and after their employment. An increase in the life expentancy of the plan participants will increase the plan's liability.

Salary Risk The present value of the defined benefit liability is calculated by reference to the future salaries of plan participants. As such, an increase in salary of the plan participants will increase the plan's liability.


171


Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Company has to manage payout based on pay as you go basis from own funds.

Mortality Risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

During the year, the company has changed the benefit scheme in line with Payment of Gratuity Act, 1972 by increasing the monetary ceiling from Rs.10 Lakhs to Rs.20 Lakhs. Change in liability (if any) due to this scheme change is recognied as past service cost.

The most recent actuarial valuation of the plan assets and the present value of defined obligation were carried out as at March 31, 2018.

The principal actuarial assumptions used in determing Gratuity are as follows:

Sl. No Particulars As at 31st March 2018

As at 31st March 2017

1 Discount Rate 7.88% 7.26%

2 Annual increase in salary 9% 9%

3 Employee Turnover 5% 5%

The discount rate relates to the benchmark rate available on G.Sec. And is taken as per deal rate as on 31.03.2018. The tenure of the G.Sec. Rate matches with the expected term of the obligation .

The following table summarize the components fo the defined benefits expense recognised in the statement of profit

or loss/OCI.

Amount in Rs.


31, 2018


31, 2017


Net Interest Cost 5,29,549 3,75,170

Components of defined benefit costs recognised in profit or loss 16,28,027 12,09,614

Re-measurment on the net defined benefit liability:

Actuarial (gains) / losses arising from change in assumptions (1,93,118) 14,41,879

Components of remeasurment recognised in other comprehensive income (1,93,118) 14,41,879

Total 14,34,909 26,51,493

The following table summarize the components of the defined benefits expense recognised in the Balance sheet

Amount in Rs.


As at 31.03.2017

(Present value of benefit obligation at the end of the Period) (92,09,033) (72,94,062)

Fair Value of plan assets at the end of the period - -

Net (liability) / Asset recognised in the Balance sheet (92,09,033) (72,94,062)


172

Movements in the present value of the defined benefit obligation are as follows :

Amount in Rs.


As at 31.03.2017

Present Value of Benefit Obligation at the beginning of the period 72,94,062 46,95,489

Interest Cost 5,29,549 3,75,170


Past Service Cost 8,87,293

(Benefit paid Directly by the Employer) (4,07,231) (52,920)

Actuarial (Gains) / Losses on Obligations - Due to change in Demographic Assumptions

Actuarial (Gains) / Losses on Obligations - Due to change in Financial Assumptions

(5,96,920) 13,71,147

Actuarial (Gains) / Losses on Obligations - Due to Experience 4,03,802 70,732

Present Value of Benefit Obligation at the end of the period 92,09,033 72,94,062

Current 9,33,378 5,51,946

Non-Current 82,75,655 64,82,325

Significant acturial assumptions for the determination of the defined obligation are discount rate, expected salary

increase and employee turnover. The sentivity analysis below have been determined based on the reasonably possible

changes of the respective assumptions occuring at the end of the reporting period, while holding all the other

assumption constant.

Amount in Rs.


31, 2018


31, 2017

Projected benefit Oboigation on Current Assumptions 92,09,033 72,94,062

Discount Rate

- Impact due to increase of 1% (8,45,208) (6,60,236)

- Impact due to decrease of 1% 9,94,188 7,77,817

Salary increase

- Impact due to increase of 1% 7,46,946 5,08,740

- Impact due to decrease of 1% (7,47,513) (4,97,622)

Employee Turnover

- Impact due to increase of 1% (67,338) (25,878)

- Impact due to decrease of 1% 73,191 22,771

Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count. This only signifies the change in the liability if the dfference between assumed and the actual is not following the parameters of the senstivity analysis.


173


Furthermore, in presenting the above senstivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liabiltiy recognised in the balance sheet.

2. Other Long term employee benefit

Actual Leave and Sick leave assumptions

Compensated absences - Earned leave eligibility is 25 days per annum and sick leave 12 days per annum. Encashment permitted up to a maximum of 300 days per employee.

The liability towards compensated absences (annual leave and sick leave) for the year ended 31st March, 2018 based on actuarial valuation carried out by using Projected Unit Credit Method resulted in increase in liability by Rs.9,25,661 (Previous year Rs.25,01,110)

Assumptions


MortalityIndian Assured Lives Mortality (2006-08)

Ultimate

Indian Assured Lives Mortality (2006-08)

Ultimate

Retirement Age 60 years 60 years

Attrition rate 5% p.a. 5% p.a.

Salary Escalation Rate 9.00% p.a. 9.00% p.a.

Discount Rate 7.88% p.a. 7.26% p.a.

While is service Encashment rate5.00% for the

next year5.00% for the

next year

Note 42: Government Grants and Government Assistance

(a) Government Grants (refer Note 25)

The Company has received government grants from Visvesvaraya Trade Promotion Centre (VTPC), a Government

of Karnataka organisation under ASIDE scheme for construction of Common Effluent Treatment Plant (CETP)

Rs.4.95 Crore as at March 31, 2018 (Rs.3.96 Crore as at March 31, 2017) and Two lane Flyover near Jokatte,

Manglore SEZ (MSEZ) Rs.13.86 Crore as at March 31, 2018 (Rs.11.88 Crore as at March 31, 2017).

(i) Movement in Government Grants

(a) CETP

Amount in Rs.


As at 31.03.2017

Opening Balance 3,96,00,000 2,97,00,000

Add: Addition during the year 99,00,000 99,00,000

Less: Amortisation during the year 8,25,000 -

Closing Balance 4,86,75,000 3,96,00,000


174

(b) Two lane Flyover

Amount in Rs.


As at 31.03.2017

Opening Balance 11,88,00,000 9,90,00,000

Add: Addition during the year 1,98,00,000 1,98,00,000

Less: Amortisation during the year -

Closing Balance 13,86,00,000 11,88,00,000

ii) The Company has adopted income approach, under which a grant is recognised in profit or loss on a systematic basis over the useful life of assets which have been capitalized.

(b) Government Assistance

Company developes special economic zone (SEZ) at Mangalore, Karnataka, India. Accordingly, it is eligible for certian economic benefits such as exemptions from customs duty, Goods and Service tax etc. which are in the nature of government assistance. These benefits are subject to fulfillment of certain obligations by the company.

Note 43: Earnings Per Share (EPS)

Basic EPS amounts are included by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.



For the year ended

March 31, 2017

Profit / (Loss) after tax for the year attributable to equity shareholders (Rs.) 3,65,71,440 (5,98,52,878)

Weighted average number of equity shares 5,00,01,200 5,00,01,200

Basic & diluted earnings per share (Rs.) 0.73 (1.20)

Facer value per equity share (Rs.) 10.00 10.00

Note 44: The amount recognised in Profit & Loss Account for investment property (refer note 5)

Amount in Rs.


Year 2016-17

Rental Income 17,70,92,243 17,28,56,562

Direct Operating Expenses from property that generate direct rental income 2,15,46,881 2,91,92,713

Direct Operating Expenses from property that did not generate direct rental income - -

Profit from investment property before depreciation 15,55,45,362 14,36,63,849

Depreciation

Profit from investment property 15,55,45,362 14,36,63,849


175


Note 45: Contingent Liabilities and Commitments

(a) Commitments

Amount in Rs.

Particulars As at 31st March 2018

As at 31st

March 2017

Estimated amount of contracts remaining to be executed on capital account and not provided for

i. Towards Plant, Property & Equipment 12,53,50,140 45,97,65,011

ii. Towards Investment Property 6,05,20,913 84,08,468

iii. Towards Intangible Assets - -

Total 18,58,71,053 46,81,73,479

Operating Lease Commitments- The Company has taken office premises under cancellable operating lease and also

pays annual lease rentals towards lease of lands for projects. The agreements are renewed on expiry. The Company

has paid for year ending March 31, 2018 Rs.1,68,17,538/- (March 31, 2017 Rs.40,03,548).


176

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d 24

F op

tica

l fib

er

betw

een

vari

ous

Tele

phon

e ex

chan

ges.

"

MSE

ZL h

as g

rant

ed t

he l

ayin

g of

riv

er

wat

er p

ipel

ine

wor

ks to

Koy

a &

Co.

(2nd

D

efen

dant

). T

he C

ontr

acto

r ha

s to

car

ry

out

the

wor

k ef

fici

entl

y. T

he l

iabi

lity

to

pay

for a

ny d

amag

e, if

cau

sed,

wou

ld b

e on

the

per

son

who

mig

ht h

ave

caus

ed

the

dam

age.

2M

r. Ra

vind

rana

th

Bajp

e M

SEZL

has

laid

the

wat

er p

ipel

ine

by t

he s

ide

of M

anga

lore

-Baj

pe

Old

Air

port

PW

D R

oad

abut

ting

the

sch

edul

e pr

oper

ties

an

d ot

her

prop

erti

es o

n th

e sa

me

line

com

men

cing

fro

m N

ethr

avat

hi

Rive

r Ba

nk a

t sa

rapa

dy t

o M

SEZ

Indu

stri

al a

rea.

Whi

le c

arry

ing

out

wor

ks n

ear

the

plai

ntiff

s (R

avin

dran

ath

Bajp

e) p

rope

rty,

he

had

cont

ende

d th

at M

SEZL

Off

icia

ls &

Con

trac

tors

hav

e tr

essp

asse

d hi

s pr

oper

ty a

nd d

emol

ishe

d th

e st

one

com

poun

d w

al o

f 7

feet

he

ight

, fo

unda

tion

of

3 fe

et h

eigh

t be

neat

h th

e gr

ound

& 2

fee

t w

ide

to t

he e

xten

t of

abo

ut 5

00 m

eter

s an

d al

so c

ut &

des

troy

ed

abou

t 10

1 v

alua

ble

tree

s an

d la

id p

ipel

ine

bene

ath

the

sche

dule

pr

oper

ties

abo

ut to

ext

ent o

f 500

met

ers.

The

refo

re, R

avin

dran

ath

Bajp

e ha

s fil

ed a

n O

rigi

nal S

uit

befo

re t

he c

ivil

cour

t di

rect

ing

the

defe

ndan

ts jo

intl

y an

d se

vera

lly t

o ap

y a

sum

of

Rs 4

7,90

, 500

/- 4

7,90

,500

Ravi

ndra

nath

Baj

pe i

s ne

ithe

r ab

solu

te

owne

r no

r is

in p

osse

ssio

n of

the

pla

int

sche

dule

Pro

pert

y or

any

par

t th

ereo

f.

The

asse

rtio

n of

the

occ

upan

cy r

ight

co

ntra

dict

s th

e cl

aim

of

ab

solu

te

owne

rshi

p. T

he P

lain

tiff

(Ra

vind

rana

th

Bajp

e) a

nd o

ther

mem

bers

of

his

fam

ily

are

havi

ng li

tiga

tion

in lo

cal c

ourt

wit

h re

gard

to

hi

s cl

aim

s on

oc

cupa

ncy

hold

ing.

The

refo

re,

we

mai

ntai

n th

at

the

Plai

ntif

f is

not

ent

itle

d to

cla

im t

he

alle

ged

loss

or

any

othe

r cl

aim

Peti

tion

er (R

avin

dran

ath

Bajp

e h

as fi

led

this

Spe

cial

Lea

ve P

etit

ion

cont

endi

ng w

heth

er T

he H

igh

Cou

rt &

Ses

sion

Cou

rt q

uash

ed t

he

proc

ess

issu

ed b

y th

e le

arne

d t

rial

cou

rt w

itho

ut a

ppre

ciat

ing

the

alle

gati

ons

in th

e C

ompa

lint a

nd a

lso

as to

whe

ther

the

Hig

h C

ourt

&

Ses

sion

Cou

rt

wer

e ex

pect

ed t

o se

e th

e le

tter

acc

ompa

nyin

g th

e C

ompa

lint

whi

ch w

as

wri

tten

by

Resp

onde

nt N

o. 4

(Et

a Sr

eeni

vasu

lu)

on b

ehal

f of

MSE

ZL t

o th

e Pe

titi

oner

.

To

esta

blis

h a

crim

inal

of

fenc

e,

oral

an

d do

cum

enta

ry e

vide

nce

need

s to

be

furn

ishe

d so

as

to s

ubst

anti

ate

any

of

the

alle

ged

offe

nces

. Th

e le

tter

wri

tten

by

Res

pond

ent

No.

4 m

erel

y re

fers

to

com

pens

ate

the

com

plai

nant

fo

r th

e lo

sses

if a

ny in

curr

ed b

y hi

m, w

hich

nee

d to

be

dete

rmin

ed s

epar

atel

y in

a c

ivil

proc

eedi

ng,

or o

ther

wis

e, a

s de

emed

fi

t by

the

per

sons

res

pons

ible

for

the

da

mag

e. T

he c

ompl

aina

nt c

anno

t alle

ge

a cr

imin

al f

lavo

r to

the

pro

ceed

ings

on

the

basi

s of

the

sai

d le

tter

.


177

Mangalore SEZ Limited3

Che

rian

Var

key

Con

stru

ctio

n C

ompa

ny

The

peti

tion

er w

as a

war

ded

the

Reac

h IV

con

trac

t fo

rmin

g pa

rt o

f Pi

pelin

e cu

m R

oad

Cor

rido

r on

Aug

ust

2011

. Th

e pe

titi

oner

had

fa

iled

to c

ompl

ete

the

awar

ded

cont

ract

as

per

mile

ston

es. D

ue t

o w

hich

the

con

trac

t w

as e

xten

ded.

The

pet

itio

ner

has

also

sto

pped

th

e w

ork

in a

n au

thou

rize

d m

anne

r on

mul

tipl

e oc

casi

ons.

Due

to

non

-han

ding

ove

r of

the

fro

nt f

or e

xecu

ting

wor

k on

Par

t A

of

the

con

trac

t w

ithi

n th

e or

igin

al c

ontr

act

peri

od,

the

peti

tion

er

was

see

king

inc

reas

e in

rat

es f

or i

tem

s co

vere

d un

der

BOQ

. Th

e co

ntra

ct e

nter

ed b

etw

een

MSE

ZL a

nd p

etit

ione

r bei

ng a

fixe

d pr

ice

cont

ract

did

not

pro

vide

for

esc

lati

on o

f ra

tes

and

com

pens

atio

n ev

ents

to

deal

wit

h in

stan

ces

of d

elay

in h

andi

ng o

ver

fron

ts.T

he

intr

ansi

genc

e on

par

t of

the

pet

itio

ner

lead

to

dela

y in

wor

ks.

Hen

ce,

the

cont

ract

was

ter

min

ated

wit

h im

med

iate

d ef

fect

on

06.1

1.20

13 a

nd a

ll Ba

nk G

uara

ntee

s fu

rnis

hed

by t

he p

etit

ione

r w

as in

voke

d. T

he p

etit

ione

r ap

proa

ched

the

Hon

'ble

Dis

tric

t C

ourt

in

Man

galo

re a

nd s

ecur

ed a

tem

pora

ry i

njun

ctio

n re

stra

inin

g M

SEZL

for

m e

ncas

hing

the

BG

. A

fter

the

mat

ter

cam

e up

for

ar

gum

ent

in t

he C

Our

t an

d se

vera

l ad

jour

nmen

ts,

the

case

file

d by

pet

itio

ner

as d

ism

isse

d by

Hon

'ble

on

05th

Apr

il 20

14.

The

peti

tion

er h

as a

lso

init

iate

d pr

ocee

ding

s in

the

mat

ter.

In o

rder

to

set

tle

the

disp

ute

out

of c

ourt

/arb

itra

tion

an

oppo

rtun

ity

for

redr

essa

l th

roug

h an

in

depe

nden

t co

mm

itte

e M

SEZL

so

ught

co

nsen

t fo

r co

nsti

tuit

ng

an

Out

side

Ex

pert

C

omm

itte

e (O

EC)

whi

ch w

as a

ccep

ted

by p

etit

ione

r. Th

e ar

bitr

atio

n pr

ocee

ding

s w

as p

ut o

n ho

ld w

hile

OEC

too

k ov

er t

he d

ispu

te r

esol

utio

n.

The

OEC

has

rec

omm

eded

MSE

ZL t

o pa

y Rs

.9.3

9 C

r to

pet

itio

ner.

How

ever

, the

pet

itio

ner

did

not

acce

pt t

he t

he r

ecom

men

dati

ons

of t

he O

EC a

nd c

hoos

e to

pur

sue

the

Arb

itra

tion

pro

ceed

ings

. Th

e A

rbit

ral T

ribu

bal h

ad p

asse

d th

e aw

ard

on 2

4.09

.201

6 st

atin

g th

at t

he p

erfo

rman

ce a

nd c

ompl

etio

n of

wor

ks u

nder

the

con

trac

t w

as o

n ac

coun

t of

bre

ache

s/de

faul

ts c

omm

itte

d by

MSE

ZL a

nd

term

inat

ion

of c

ontr

act

was

unl

awfu

l. M

SEZL

was

dir

ecte

d to

pay

to

Rs.

19,2

3,53

,085

6,9

0,09

,159

MSE

ZL

has

file

fo

r m

odif

icat

ion

of

the

orde

r be

fore

the

Tri

buna

l. M

SEZL

an

d al

so

CV

CC

ha

ve

file

d a

peti

tion

co

ntes

ting

th

e A

rbit

rati

on

Aw

ard

befo

re t

he P

rl.D

istr

ict

& S

essi

ons

Cou

t at

Man

galu

ru u

nder

AS

No.

1of

201

7 &

AS

No2

of

2017

in

Jan

& F

eb ‘

17.

The

mat

ters

wer

e sc

hedu

led

on

25th

N

ovem

ber,

2017

for

app

eare

nce

of t

he

arbi

trat

ors.

Mea

nwhi

le,

the

BG i

ssui

ng

Bank

ha

d al

so

file

d an

im

plea

ding

ap

plic

atio

n. B

oth

the

part

ies

have

not

ob

ject

ed t

o th

e im

plea

ding

app

licat

ion

of t

he B

nak.

The

mat

ters

are

pos

ted

for

argu

men

ts o

n 27

th A

pril,

201

8

TOTA

L 7

,53,

75,6

59


178

Note 46: Critical judgements in applying accounting policies

I. Recognistion of Revenue

(a) The Company has recognized revenues amounting to Rs.11.73 Crores for current year 2017-18 (for

previous year 2016-17 Rs.11.64 Crores towards Zone Operation and Maintenance charges (O & M).

The agreements for Zone O & M charges are under finalization. Pending finalization of agreements,

O & M charges are recognized at cost plus markup. Adjustments for increase / decrease will be given

effect in the year in which agreements are finalized.

(b) The Company’s power distribution business is rate / tariff regulated by Karnataka Electricity Regulatory

Commission (KERC). Hence, the Company files Annual Revenue Requirement / tariff application before

KEFC. The KERC passes tariff order determining and notifies the retail supply tariff to be charged

from Consumers. In respect of FY 2017-18, the revenue is recognized based on the KERC tariff order

dated May 8, 2017 applicable w.e.f. April 1, 2017. The Company upon submission of Annual audited

accounts (pertaining to power distribution business) the KERC appraises the accounts and finalizes the

revenue requirement. Thus, on final determination of the revenue requirement/ by KERC, the effect

will be given for the difference, if any accordingly

(c) One time fee towards right to use 'Road cum Corridor Project' which is in the nature of operating lease

is recognised as income on a straight line basis over the period of right to use.

II. Recognition of borrowing cost

Borrowing costs are charged to the Statement of Profit & Loss applying the effective interest method.

The interest charged on the loan is 25 basis point plus one year Maximum Commercial Lending Rate (MCLR)

rate of the Lender. If the Lender changes the MCLR rate, the effective rate of interest will also change

resulting in reduction or increase in interest cost.

III. Estimated useful life of tangible and intangible assets

(a) The Company has estimated the useful life of certain assets based technical evaluation and that

of certain assets based on useful life as specified in Schedule-II to the Companies Act, 2013. The

Management believes that these estimated useful lives are realistic and reflect fair approximation of

the period over which the assets are likely to be used. The estimated useful life and residual values are

reviewed at the end of each financial year and if necessary, changes in estimates are accounted. The

Company has adopted unit of production method for charging depreciation in respect of River Water

Assets and Tertiary Treatment Plant assets (both excluding Electrical Installations and Equipment)

Under unit of production method, the Management estimates the production likely to be achieved in

future years. The actual productions are reviewed at the end of each financial year and if necessary,

changes in estimation are accounted.

(b) The Company amortizes the cost of barrage useful usage rights on a straight-line basis over the lease

period.


179


IV. Impairment of Trade Receivable

The impairment provision for financial assets is based on the assumption about risk of default and expected

loss rates. The Company uses judgements in making these assumptions and selecting the input impairment

calculation based on the Company past history as well as forward looking assumptions at the end of each

reporting period.

V. Income taxes

The computation of advance taxes, provision for current / deferred tax are made based on significant

judgements and which may get revised pursuant to position taken by the tax authourities.


Sd/- Sd/- Sd/- N R Suresh Paritosh Kumar Gupta Akshaya Kumar Sahoo Partner Managing Director Director Membership No. 021661 DIN : 01054182 DIN : 07355933


Place: New Delhi Place: New Delhi Date:14/05/2018 Date:14/05/2018


180

Notes


181


Mangalore SEZ LimitedRegd Office: 3rd Floor, MUDA Building, Urwa Stores, Ashok Nagar,

Mangaluru, Karnataka - 575 006, India, Phone: +91-0824-2452760 Fax: +91-0824-2452749

Email: [email protected]; Website:www.mangaloresez.com;CIN: U45209KA2006PLC038590

ATTENDANCE SLIP12th Annual General Meeting on 28th September, 2018

(PLEASE FILL THIS ATTENDANCE SLIP AND HAND IT OVER AT THE ENTRANCE OF THE MEETING HALL)

Sr. No: ................................

Folio No. / DP ID / Client ID No.:

Name of the Shareholder:

Registered Address:

No. of Shares held:

I Certify that I am member / Proxy for the member of the company, I hereby record my presence at the 12th Annual

General Meeting of the Company to be held on Friday, the 28th day of September, 2018 at The Ocean Pearl, Navabharath

Circle, Kodialbail, Mangalore – 575 003.

(Signature of Member / Proxy)

Note: Please fill in the attendance slip and hand it over at the entrance of the meeting.


182


183


S.No. Particulars For AgainstOrdinary Business

1 a. To receive, consider and adopt the Audited Standalone Financial Statements of the Company for the financial year ended March 31, 2018, the Report of the Board of Directors and the Report of the Auditors thereon; and b. the Audited Consolidated Financial Statements of the Company for the financial year ended March 31, 2018 and the Report of the Auditors thereon.

2 To appoint a director in place of Shri A.K. Sahoo (DIN: 07355933), who retires by rotation and being eligible offers himself for re-appointment

3 To appoint M/s Ray & Ray, Chartered Accountants, bearing Registration No.301072E as the Statutory Auditors of the Company for a period of 5 years. Special Business

4 To appoint Shri Shashi Shanker (DIN: 06447938) as Director of the company5 To appoint Smt. Cholpady Vathika Kamath as Director of the company6 To appoint Shri Saibal Kumar De (DIN: 00498241) as Director of the company7 To appoint Shri Venkatesh Madhava Rao (DIN: 07025342) as Director of the company8 To re-appointment Shri Paritosh Kumar Gupta (DIN: 01054182), as Managing Director for a further

period of 1 year with effect from May 19, 2018, at a remuneration of Rs 30.00 Lakhs per annum.

AffixRevenueStamp

Signed this ________________ day of ________________ 2018

Signature of the Shareholder ____________________________

Note: This form of proxy in order to be effective should be duly completed and deposited at the Registered Office of the Company, not less than 48 hours before the commencement of the Meeting.

Signature of first proxy holder Signature of third proxy holderSignature of second proxy holder

Mangalore SEZ LimitedRegd Office: 3rd Floor, MUDA Building, Urwa Stores, Ashok Nagar, Mangaluru, Karnataka - 575 006, India,

Phone: +91-0824-2452760 Fax: +91-0824-2452749 Email: [email protected]; Website:www.mangaloresez.com;

CIN: U45209KA2006PLC038590

PROXY FORM[Pursuant to Section 105 (6) of the Companies Act, 2013 read with Rule 19 (3) of the Companies (Management and Administration) Rules, 2014]

Name of the Member(s):Registered address:E-mail Id:Folio No. / Client ID:DP ID:

I / We being the member(s) of and holds _____________________ shares of the above named Company hereby appoint:

(1) Name: ________________________________________________________________________________________________________ Address: ______________________________________________________________________________________________________ E-mail Id: ____________________________________________________ or failing him;



as my / our proxy to attend and vote (on a poll) for me / us and on my / behalf at the 12th Annual General Meeting of the Company to be held on Friday, the 28th September, 2018 at 12.30 pm at The Ocean Pearl, Navabharath Circle, Kodialbail, Mangalore – 575 003 and at any adjournment thereof in respect of such resolutions as are indicated below:


184

To N

H 6

6

LADY HILL

MSEZL OFFICEMangalore Urban

Development Building

To BejaiLALBAGH

MangaloreCity Corporation M

G R

oad

The Ocean Pearl

To Dongerkery

City CentreMall

NavabharathCircle

PVSJunction Bunts Hostel

ROUTE MAP FOR THE VENUE OFTH12 AGM OF MANGALORE SEZ LTD

ROUTE MAP FOR THE VENUE OF 12TH AGM OF MANGALORE SEZ LTD

corporate informationmangaloresez.com/images/company_policies/msezl...board of directors shri shashi...

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